Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý

Smaller reporting company ý

Emerging growth company ý

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ý

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No ý

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 29, 2018 was approximately $16.8 million.

As
of March 11, 2019, there were 43,214,383 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for its 2019 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed within 120 days of
the registrant's fiscal year ended December 31, 2018, are incorporated by reference in Part III of this Annual Report on Form 10-K. Except with respect to information specifically
incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.

This Annual Report on Form 10-K includes statements that are, or may be deemed, "forward-looking statements." In some cases, these
forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes," "estimates," "anticipates," "expects," "plans," "intends," "may," "designed,"
"could," "might," "will," "should," "approximately" or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these
words. They appear in a number of places throughout this Annual Report on Form 10-K and include statements regarding our current intentions, beliefs, projections, outlook, analyses or current
expectations concerning, among other things, our ongoing and planned development, commercialization, and market uptake of Twirla® (AG200-15) and our other potential product candidates, the
strength and breadth of our intellectual property, our ongoing and planned clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for
our product candidates, the legal and regulatory landscape impacting our business, the degree of clinical utility of our products, particularly in specific patient populations, expectations regarding
clinical trial data, our development and validation
of manufacturing capabilities, our results of operations, financial condition, liquidity, prospects, growth and strategies, the length of time that we will be able to continue to fund our operating
expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect the industry or us.

By
their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments
and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for
each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that forward-looking statements are not guarantees of future performance and that our actual results
of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Annual Report on
Form 10-K. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking
statements contained in this Annual Report on Form 10-K, they may not be predictive of results or developments in future periods.

Some
of the factors that we believe could cause actual results to differ from those anticipated or predicted include:



our available cash and our ability to obtain additional funding to fund our business plan without delay and to continue as a going concern;



our ability to adequately and timely respond to the deficiencies in the second Twirla complete response letter, or 2017 CRL, issued by the U.S.
Food and Drug Administration, or FDA, on December 21, 2017;



the potential that the FDA determines that our data do not support resubmission or approval of the Twirla new drug application, or NDA, and
requires us to conduct additional studies or reformulate Twirla to address the concerns raised in the 2017 CRL;



our ability to resubmit the Twirla NDA and obtain and maintain regulatory approval of our product candidates, and the labeling under any
approval we may obtain;



our ability to obtain a favorable Advisory Committee vote in the likely event the FDA requires an Advisory Committee to review the benefit and
risk profile of Twirla;

our third-party manufacturer, Corium International, Inc.'s, or Corium, inability to complete any work or provide any data and other
information necessary to support the resubmission and approval of our Twirla NDA;



our ability along with Corium to complete successfully the scale-up of the commercial manufacturing process for Twirla, including the
qualification and validation of equipment related to the expansion of Corium's manufacturing facility and to pass a FDA pre-approval inspection;



the performance and financial condition of Corium or any of the suppliers to our third-party manufacturer;



the success and timing of our clinical trials or other studies;



our ability to retain key employees;



regulatory and legislative developments in the United States and foreign countries, which could include, among other things, a government
shutdown;

our inability to timely obtain from our third-party manufacturer, Corium, sufficient quantities or quality of our product candidates or other
materials required for a clinical trial or other tests and studies; and



our ability to successfully implement our strategy.

Any
forward-looking statements that we make in this Annual Report on Form 10-K speak only as of the date of such statement, and we undertake no obligation to update such
statements to reflect events or circumstances after the date of this Annual Report on Form 10-K. You should also read carefully the factors described in the "Risk Factors" section of this
Annual Report on Form 10-K to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot
assure you that the forward-looking statements in this Annual Report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the
inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other
person that we will achieve our objectives and plans in any specified timeframe, or at all.

This
Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by
third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do
not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently
verified such data.

We
qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

We are a forward-thinking women's healthcare company dedicated to fulfilling the unmet health needs of today's women. Twirla® and
our other current potential product candidates are designed to provide women with contraceptive options that offer greater convenience and facilitate compliance. Our lead product candidate, Twirla,
also known as AG200-15, is a
once-weekly prescription combination hormonal contraceptive patch that is at the end of Phase 3 clinical development. We plan to resubmit our new drug application, or NDA, for Twirla to the
U.S. Food and Drug Administration, or FDA, and seek FDA approval of the NDA in 2019.

Twirla and the Contraceptive Market

Our short-term goal is to establish a market-leading franchise in the multi-billion-dollar U.S. hormonal contraceptive market built on the
planned initial approval of Twirla in the U.S. Over half of those sales were generated by branded products. Contraceptive methods, other than sterilization, can be divided into non-hormonal and
hormonal alternatives. Non-hormonal contraceptive products available in the United States include the diaphragm, male condom and female condom. There are several methods of hormonal contraception
available in the United States, including oral contraceptives, vaginal rings, intrauterine contraceptive devices, or IUDs, subcutaneous implants, injectables and a transdermal patch that is available
in branded and generic versions. Over the years, the doses of ethinyl estradiol, or EE, most commonly included in combined hormonal contraceptives, or CHCs, have steadily decreased to 35 micrograms
per day or below, due to associated safety risks of higher EE doses. Currently, there is only one other contraceptive patch available in the United States, and it delivers EE at a level that is 60%
higher than that delivered with low-dose oral contraceptives containing 35 micrograms of EE. As a result, the currently approved patch carries a boxed warning describing safety risks associated with
this higher level of EE. Before these issues were identified with the first marketed patch, it achieved rapid market uptake and quickly captured approximately 10% of the CHC market. Twirla is designed
to address the limitations associated with the dose and physical characteristics of the currently approved contraceptive patch. We have developed a proprietary transdermal patch technology, called
Skinfusion®, which is designed to provide advantages over the currently available patch and is intended to optimize patch adhesion with patient wearability. We believe there is an unmet
market need for a low-dose contraceptive patch that is designed to address the limitations of the existing patch, while increasing patient convenience and compliance in a non-invasive fashion.

Twirla
is a CHC patch that contains the active ingredients EE, which is a synthetic estrogen, and levonorgestrel, or LNG, which is a type of progestin, a synthetic steroid hormone, both
of which have an established history of efficacy and safety in currently marketed combination low-dose, oral contraceptives. Twirla delivers approximately 30 micrograms of EE per day, a dose of EE
consistent with low-dose oral contraceptives. The daily delivery of EE from Twirla is lower than the levels of EE delivered by the currently approved patch products, as reported in that patch's label.
Twirla is designed using our proprietary Skinfusion technology to deliver both hormones over a seven-day period at levels comparable to currently marketed low-dose oral contraceptives. By delivering
these active ingredients over seven days, in a comfortable, convenient and easy-to-use weekly patch, Twirla is designed to promote ease of use and enhanced patient compliance. The patch is applied
once-weekly for three weeks, followed by a week without a patch. If approved, Twirla will be packaged with three individually-wrapped patches per carton to provide for one 28-day cycle of therapy.

Twirla
is round and made of a soft, flexible fabric, designed to flex with the movement of a woman's body. Twirla is a matrix patch consisting of several layers of material which contain
the active ingredients EE and LNG, inactive ingredients to assist in transport of EE and LNG across the skin,

and
adhesives that allow adherence to the skin. There is a barrier formed between the inner portion of the patch, which contains the active ingredients, and the outer portion of the patch, which only
contains the adhesive. This barrier is intended to prevent the active and inactive ingredients from migrating to the peripheral portion of the patch, and from breaking down the adhesive in that
portion of the patch. Twirla is also designed to help prevent seepage of the adhesives from around the edges of the patch where it could collect dirt and leave a sticky black ring on the skin. The six
layers of the patch are integrated to create a patch which has a slim profile, less than one millimeter, and is designed to be unobtrusive when applied.

Twirla Clinical Development Program and Regulatory History

We have conducted a comprehensive clinical program, with completed Phase 1, Phase 2, and Phase 3 trials enrolling over
4,100 women, over 3,500 of whom received Twirla. Most recently, in December 2016, we completed a Phase 3 trial, the SECURE clinical trial, in which we enrolled over 2,000 women for up to one
year of treatment. In the Phase 1 and Phase 2 clinical trials, we demonstrated that Twirla delivers levels of both EE and LNG to the blood stream that are consistent with those delivered
by current low-dose oral contraceptives. Prior to the SECURE clinical trial, we completed two Phase 3 clinical trials that enrolled over 1,900 women in the aggregate for up to 12 months,
and we demonstrated that Twirla generally had comparable efficacy and tolerability to an approved low-dose oral contraceptive. However, these studies were not designed as non-inferiority studies and,
as such, the comparative conclusions that may be drawn from these studies are limited. In the SECURE clinical trial, we observed positive evidence of efficacy for Twirla based on use for up to one
year. In our completed Phase 3 trials to date, over 1,000 women have received Twirla for 12 months. Across all completed clinical trials, Twirla was generally well tolerated and had a
favorable safety profile.

In
our Phase 3 trials, the primary measure of efficacy is the Pearl Index, or PI, which is a measure of the rate of unintended pregnancies experienced by women in the study.
Specifically, the PI is expressed as the number of pregnancies per 100 woman-years of use. In the SECURE clinical trial, the overall intent to treat population of subjects 35 years of age and
under was 4.80 with an upper bound of the 95% confidence interval of 6.06, but in the obese subpopulation of subjects 35 years of age and under, the PI was 6.42 with an upper bound of the 95%
confidence interval of 8.88. If we were to exclude the data on the obese subpopulation, our PI for non-obese patients was 3.94 with an upper bound of the
95% confidence interval of 5.35. The highest bound PI for a hormonal contraceptive product approved by the FDA to date was 3.19 and the highest upper bound of the 95% confidence interval was 5.03. The
FDA has indicated that it anticipates reviewing the safety and efficacy of Twirla during an Advisory Committee meeting to obtain input on whether the benefits of Twirla outweigh the risks, which would
include a consideration of the PI for Twirla.

We
have had a long and complicated history seeking regulatory approval for Twirla in the U.S., which has included the submission of our NDA for Twirla twice (first in 2012 and again in
2017), the issuance of two complete response letters, or CRLs, from the FDA in 2013 and 2017, and the need to pursue formal dispute resolution with the FDA after the 2017 CRL. We expect to face
significant challenges as we continue to pursue regulatory approval for Twirla, including a likely Advisory Committee review of the safety and efficacy of Twirla, including a discussion regarding the
Pearl Index from our SECURE Phase 3 clinical trial that the FDA noted is substantially higher than other previously approved CHCs, and a likely pre-approval inspection of our third party
manufacturer's facility, which must be successfully completed prior to approval.

We
plan to resubmit our Twirla NDA responding to the 2017 CRL in the second quarter of 2019. Our planned resubmission is intended to be a complete response to the 2017 CRL and will
include the results from the comparative wear study, additional information on our manufacturing process, and other analyses responding to the 2017 CRL. Consistent with our previous NDA resubmission
in 2017,

we
currently expect that our resubmission will be categorized as a Type 2 resubmission and receive a review period of six months from the date of resubmission of the NDA. Following the
resubmission, we anticipate that FDA will likely re-inspect our contract manufacturer, Corium, and hold an Advisory Committee meeting to review of the safety and efficacy of Twirla.

Manufacturing and Commercialization Strategy for Twirla

Our Skinfusion technology makes Twirla the first patch capable of delivering a contraceptive dose of LNG across the skin, allowing weekly
application using a patch that is soft and flexible and is designed to adhere well with low levels of skin irritation. We, along with Corium, our manufacturing partner, have made a significant
investment in a proprietary process to manufacture Twirla. We believe we have developed a robust process to reliably manufacture Twirla on a commercial scale. The materials produced for our clinical
trials were manufactured using the same process that we expect will be used for our commercial-scale manufacturing, and we have made a significant investment
in equipment for commercial-scale manufacturing if Twirla is approved. Along with Corium, we are enhancing our quality-control test methods in a way that we believe will address the issues identified
by the FDA in both the 2017 CRL and the Corium facility inspection and that will allow us to continue to use our current commercial manufacturing process for Twirla. We believe that the technical
challenges and know-how involved in manufacturing, including proprietary chemistry, production to scale and use of custom equipment and reproducibility, present significant barriers to entry for other
pharmaceutical companies who might potentially want to replicate our Skinfusion technology.

In
January 2018, following our receipt of the 2017 CRL, we significantly scaled back our preparations for commercialization of Twirla, which resulted in the halting of all substantive
activities at Corium, including running of our equipment. Accordingly, we do not expect commercial pre-launch and manufacturing validation activities to resume until we are able to address the 2017
CRL and receive approval of Twirla. If Twirla is approved, we would need to recommence scale-up activities, which would include qualification of our manufacturing equipment and validation of the
manufacturing process.

However,
if Twirla is approved, we intend to commercialize Twirla in the United States through a direct sales force. Obstetricians and gynecologists, or ObGyns, Nurse Practitioners, or
NPs, and Physician Assistants, or PAs, combine to write most CHC prescriptions, with ObGyns primarily driving prescriptions in the category. We anticipate that a targeted sales force focused initially
on ObGyns, NPs, PAs and primary care providers who comprise the top prescribers of contraceptives will be highly effective. We believe that we can address this market with a specialty sales force of
approximately 70 to 100 representatives. We also intend to augment our sales force through digital marketing and other techniques to market directly to patients. We will require additional capital to
fully implement our commercialization plan for Twirla, if approved.

Intellectual Property

Our intellectual property represents an additional barrier to potential competitors. We have thirteen issued U.S. patents, eight of which cover
Twirla and that we intend to list in the Orange Book, the first of which expires in 2021 and the last of which expires in 2028, and five that provide additional coverage for other potential product
candidates in our pipeline. The Orange Book lists drug products, including related patent and exclusivity information, approved by the FDA under the Federal Food, Drug, and Cosmetic Act. If a patent
is listed in the Orange Book, potential competitors seeking approval of drug products under an Abbreviated New Drug Application, which provides for the marketing of a generic drug product that has the
same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, of a previously approved product, or a 505(b)(2)
application, for which the listed drug is a reference product, must provide a patent certification in their application stating either that (1) no patent

information
on the drug product has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be
infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. In addition, we continue to prosecute additional patent applications relating to Twirla, as
well as our other potential product candidates, both in the United States and internationally. The intellectual property behind all of our potential product candidates in the pipeline and our
Skinfusion technology consists of patent families developed and wholly-owned by us. There are no royalties or payments owed to third parties on our Skinfusion technology or any of our product
candidates.

Potential Pipeline

Twirla is our lead product candidate. In addition to Twirla, we have a potential pipeline of other new transdermal contraceptive products,
including AG200-ER, which is a regimen designed to allow a woman to extend the length of her cycle, AG200-SP, which is a regimen designed to provide shorter lighter periods, AG200-ER (SmP), which is a
regimen designed to allow a woman to extend the length of her cycle and experience shorter, lighter periods, and AG890, which is a progestin-only contraceptive patch intended for use by women who are
unable or unwilling to take estrogen. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We have halted all further work on our
pipeline except for Twirla. We will require additional capital should we choose to advance the development of our other potential product candidates.

Background

Hormonal Contraception Overview

A woman is biologically capable of pregnancy from the time of her first menstrual cycle, at the average age of 12.6 years, to natural
menopause, at the average age of 51.3 years. This is
nearly half of a typical woman's lifespan and, for the typical woman, the majority of this time frame is spent trying to avoid pregnancy or is characterized by no desire to become pregnant. Nearly
half of the pregnancies that occur each year in the United States are unplanned. The United States was the first country to approve a hormonal contraceptive, with the approval of the first
contraceptive pill in 1960. Data from 2011 to 2013 from the Centers for Disease Control, or CDC, indicate that approximately 28% of women aged 15 to 44 use some form of hormonal contraception, which
amounts to approximately 17 million U.S. women.

Hormonal
contraceptives are typically composed of synthetic estrogens and progestins. Contraceptives containing both estrogen and a progestin are referred to as CHCs, and contraceptives
containing only progestin are referred to as P-only. There are three synthetic estrogens approved in the United States for use in contraceptive products: EE, mestranol, and estradiol valerate. EE has
been available for over 40 years and is the estrogen component in nearly all CHCs today. There are 10 different progestins that have been used in contraceptives sold in the United
States. The progestin component provides most of the contraceptive effect, while the estrogen component primarily provides cycle control, for example, minimizing bleeding or spotting between cycles.
The progestin exerts its contraceptive effect by inhibiting ovulation, or release of an egg from the ovary, and by thickening cervical mucus. Thickening cervical mucus helps to prevent sperm entry
into the upper genital tract. The estrogen component, in addition to providing cycle control, makes a small contribution to contraception by decreasing the maturation of the egg in the ovary.

Hormonal
contraceptives are generally well-tolerated and are generally safer than pregnancy. A risk associated with hormonal contraceptives is a rare but serious adverse event called
venous thromboembolism, or VTE, which involves the formation of a blood clot in a vein. VTEs can be life-threatening, and typically present as either deep vein thrombosis, or DVT, or pulmonary
embolism, or PE. Evidence supports that the increased risk of VTE in CHC users is related to the estrogen dose

and
duration of use, with higher doses of estrogen being associated with a potentially increased risk of VTE. Estrogen increases formation of clotting factors in the liver and decreases production of
elements that promote breakdown of blood clots. Most experts believe that progestins on their own have minimal to no impact on the clotting system, but some progestins, when combined with estrogen,
can increase estrogen's effect on the clotting system.

The
likelihood of a woman spontaneously developing a VTE is extremely low and the use of combination oral contraceptives, or COCs, increases the incidence only slightly, and less than
pregnancy. Epidemiologic studies evaluated by the FDA have demonstrated the incidence of VTE in women based on pregnancy or use of COCs as follows:

Incidence of VTE Based on Pregnancy Status or use of COCs

Population

VTE incidence
(cases per 10,000
woman-years*)

Non-pregnant woman who does not use a COC

1 to 5

COC users

3 to 12

Pregnant women

5 to 20

Postpartum women (in the 12 weeks following delivery)

40 to 65

*

One
woman-year is one woman using a contraceptive for one year, which is either 12 months or 13 cycles

The
available progestins are commonly categorized into generations, based on their history of introduction in the United States. The first and second generation progestins, including
LNG, have
been available in contraceptive formulations in the United States for over 30 years. The third and fourth generation progestins, for example desogestrel and drospirenone, respectively, were
developed to help reduce androgenic side effects, such as oily skin and acne. Epidemiologic data suggest that CHCs containing third and fourth generation progestins are associated with an increased
risk of VTE as compared to those containing the second-generation progestin, LNG.

Effectiveness of Hormonal Contraceptives

For the purpose of FDA approval, contraceptive effectiveness is measured by a calculation called the Pearl Index, or PI, and its associated 95%
confidence interval, or CI. The PI is a measure of the rate of pregnancies over a specific period of time in a clinical trial and is expressed as the number of pregnancies per 100 woman-years, or WY,
of use. Each cycle lasts 28 days, so there are approximately 13 cycles in one year. The PI calculation typically includes all pregnancies for which conception is estimated to have occurred
while the subject was using the drug (i.e., on-treatment pregnancies), but only includes cycles where the woman did not use backup contraception, such as a condom. The PI values from clinical
trials are affected by several factors, including differences in study design, increased sensitivity of early pregnancy tests, weight and body mass index, or BMI, of the study population, user
experience and inconsistent or incorrect use of the contraceptive method. In addition, there has been an observable trend in PIs for approved CHCs demonstrating an increase in the PIs over time,
believed to be related to changes in study design and study populations. The FDA has not established any regulatory guidance on specific parameters for an acceptable PI or CI to support
approval.

The
contraceptive failure rates observed in clinical trials are generally lower than those seen once a CHC is approved and in use by a broad population, referred to as typical use,
without the close monitoring of a clinical trial setting. There is a large difference in pregnancy rates under conditions of perfect use, where the method is used following the directions exactly, and
typical use. For example, for CHCs, including oral contraceptives, the vaginal ring and the transdermal patch, the percent of women

experiencing
an unintended pregnancy during the first year of use is 0.3% for perfect use and 9.0% for typical use.

U.S. Hormonal Contraceptive Market Background

Contraceptive methods, other than sterilization, can be divided into non-hormonal and hormonal alternatives. Examples of non-hormonal products
available in the United States include the diaphragm, male condom, female condom, and non-hormonal intrauterine device, or IUD. There are several categories of hormonal contraception products
available in the United States, including:



oral contraceptive;



vaginal ring;



transdermal patch;



hormonal IUD;



subcutaneous implant; and



injectable.

The
U.S. hormonal contraceptive market is a multi-billion-dollar market. The CHC portion of the market, consisting of pills, a transdermal patch and a vaginal ring (not including the
Annovera ring,
which was approved in August 2018), generates significantly greater prescription volume and sales compared to the P-only portion of the market, consisting of IUDs, injectables, implants, and P-only
pills. Twirla is a CHC and, if approved, we believe it will compete primarily with products in the CHC market.

The
U.S. hormonal contraceptive market is a mature market, with many branded and generic products available. Historically over the last decade, the market growth was flat to declining as
measured by prescription volume, with the exception of a 4.8% increase in 2013 compared to 2012. Compared to 2016, prescriptions for hormonal contraceptives decreased by 3.7% in 2017. Gross sales have
increased minimally over recent years for both the total hormonal contraceptive market and the CHC market. Market growth in gross sales is primarily due to price increases amongst branded products.

We
believe there are two possible factors primarily affecting prescription volume in the contraceptive market. First, according to U.S. Census Bureau data and projections, the population
of women aged 15 to 44 years has been growing at a rate of approximately 0.4% to 0.5% per year since 2011, increasing this population by 250,000 to 300,000 women per year.

Source: U.S.
Census Bureau, National projections released 2008 based on 2000 census data.

Second,
in 2010, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act, or collectively, the ACA, was signed into law, which,
among other things, requires all health plans, with limited exceptions, to cover certain preventive services for women with no cost-sharing, which means no deductible, no co-insurance and no
co-payments by the patient, effective August 1, 2012. These services include those set forth in the Guidelines for Women's Preventive Services, or HRSA Guidelines, and adopted by the U.S.
Department of Health and Human Services Health Resources and Services Administration. Contraceptive methods and counseling, including all FDA approved contraceptive methods as prescribed, are included
in the HRSA Guidelines. Since these new ACA provisions went into effect in August 2012, quarterly prescription volume growth for the CHC market rose from negative growth year-on-year to positive
growth between 4.0% and 5.0% for each of the six quarters following implementation. However, this appears to be a one-time phenomenon, as the market volume has declined on average 0.4% annually from
2014 to 2017.

During
the period following enactment of the ACA, generic oral contraceptives have shown the greatest growth, primarily at the expense of branded oral contraceptives. This is likely due
to the policies that were implemented by many managed care plans, which generally only provided generic oral contraceptives with no cost-sharing to the patient. The effect on non-oral products is less
clear, but prescription volume for the vaginal ring showed a 10.0% decline from 2013 to 2017, while the prescription volume for the patch increased by 30.0% over the same time period. In May 2015,
several government agencies, such as the U.S. Department of Health and Human Services, or HHS, the Department of Labor, or DOL, and the U.S. Department of Treasury, or Treasury, issued a clarification
in the form of an FAQ which clarified the requirements for coverage of contraceptives under the ACA. The FAQ states that plans and issuers must cover without cost-sharing at least one form of
contraception in each of the 18 current methods that the FDA has identified for women in its current Birth Control Guide. The patch is identified as a specific method in the FDA Birth Control Guide,
and therefore insurers must cover at least one patch product with no cost-sharing to the patient. Because this clarifying guidance is applied for plan years (or in the individual market, policy years)
beginning on

or
after 60 days from the date of publication of the FAQs, patients did not have the benefit of this clarification until their new plan year, which generally started in January 2016.

On
January 20, 2017, the administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions
from, or delay the
implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical
devices, among others. Congress also could consider subsequent legislation to repeal and replace elements of the ACA that are repealed. Additionally, in October 2017, the Department of Health and
Human Services, jointly with the Department of Labor and the Treasury, issued two interim rules outlining exemption processes for employers not wanting to offer contraceptive coverage based on their
religious beliefs or sincerely held moral convictions. While there is an injunction against the administration prohibiting it from implementing these rules, the ultimate outcome of that litigation
cannot be predicted. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our business. We will continue to monitor the healthcare reform
efforts and agency implementation. We believe the CHC market will maintain a long-term neutral annual growth rate.

Despite
the availability of generic contraceptives for over 25 years, branded products have maintained a significant, though declining, share of the CHC market. Branded
contraceptives in the CHC market have driven significant increases in the value of branded total prescriptions, or TRx. In the five years ended December 2018, the average annual price increase among
the top branded products was 10.8%. The average price per cycle, referred to as the wholesale acquisition cost, or WAC, for a single 28-day cycle of the top branded products was $41.53 in 2006 and
rose to $152.94 by December 2018. As of October 2014, the branded CHC transdermal patch (Ortho Evra) has been discontinued, and the generic CHC transdermal patch (Xulane) is currently priced at
$122.15 per cycle. The other non-oral form of CHC, the vaginal ring, is currently priced at $162.63 per cycle. We cannot predict whether the manufacturers of branded products will continue to increase
prices going forward, but we believe we will be able to set a WAC price for Twirla, if approved, that is comparable to other branded CHC products at the time of launch.

Contraceptive Pills

Based on 2014 data from the CDC, of women who choose to use a hormonal contraceptive, approximately 64% use the contraceptive pill, vaginal ring
or patch, the majority of which use the contraceptive pill. The remaining 36% of women using hormonal contraception are split between using injectables, implants, or IUDs. Based on this information,
we believe that contraceptive pills are the most popular choice because:



patients and physicians are familiar with pills;



pills were the first to market and have been aggressively promoted for a long period of time;



historically, pills have been a covered benefit with good reimbursement in private and public healthcare plans; and



pills are a non-invasive option.

However,
compliance remains a significant draw-back with pills. Published studies have shown that the average woman who uses oral contraceptives misses approximately two to four pills
per month, which increases the potential for unintended pregnancies. We believe that a patch can offer greater convenience than a pill, as it does not require daily administration and, for certain
women, could lead to greater compliance and ease of use.

The Ortho Evra® contraceptive patch, or Evra, was introduced in early 2002 and was the first FDA-approved contraceptive patch. The
initial approved labeling for Evra indicated that it delivered a daily EE dose of 20 micrograms. Evra had rapid uptake in the contraceptive market and achieved a 10% share of the CHC market by
September 2003. Following FDA approval of Evra, users of Evra began to report thrombotic and thromboembolic events to the FDA. Johnson & Johnson, the manufacturer of Evra, revised the Evra
labeling in November 2005 to include information that EE exposure with Evra is 60% higher than that of an oral contraceptive containing EE of 35 micrograms, based on area under the curve, a
commonly-used metric for measuring EE exposure in contraceptives. This information was ultimately included in an addition to the boxed warning that was unique to the Evra label. The Evra market share
declined rapidly following the labeling changes, from a peak share of 11% in 2005, to 4% by the end of 2006, to 1.4% by the end of 2013, where it stabilized, with a 1.5% share of the market based on
combined prescriptions for Evra
and its generic equivalent (Xulane®) in 2014. In more recent years, the Xulane share of the CHC market grew slightly, with a 1.7% TRx share in 2016 and 1.8% TRx share in 2017.

In
April 2014, Mylan Inc. announced the launch of Xulane®, a generic version of Evra. Generic pharmaceutical products are the chemical and pharmaceutical equivalents
of the brand or a reference listed drug, or RLD. Generic drugs are bioequivalent to their reference brand name counterparts. Bioequivalence studies compare the bioavailability of the proposed drug
product with that of the RLD product containing the same active ingredients. Bioavailability is a measure of the rate and extent to which the active ingredient is absorbed from a drug product and
becomes available at the site of action. Under pharmacy dispensing rules governed by state law, depending on the state, if an automatic generic substitute is introduced, the pharmacist may dispense
either the prescribed product, or they may replace it with an equivalent generic without being required to inform the patient or healthcare professional. In addition, the FDA offers a 180-day
exclusivity period for generic products in specific cases. The first generic applicants to submit a substantially complete Abbreviated New Drug Application containing a paragraph IV
certification to a listed patent are protected from competition from other generic versions of the same drug for the 180 days. As of December 2018, no other generic equivalents to Evra have
been introduced.

The
FDA has maintained, in spite of the wording in the labeling for Evra and its approved generic, that none of the epidemiologic studies provides a definitive answer regarding the
relative risk of VTE with Evra compared to combined oral contraceptive use or whether the increased risk that some studies demonstrated is directly attributable to Evra. An advisory committee for the
FDA stated that the benefits of Evra outweigh the risks. In its 2012 denial of a Citizen's Petition calling for the withdrawal of Evra, the FDA followed the committee's recommendations stating that
the increased VTE risk does not warrant removal from the market, and that the labeling revisions to the Evra label provide a sufficient update and guidance on the interpretation of the epidemiologic
data about the risk of VTE with Evra. In spite of the labeling changes, and Johnson & Johnson ceasing promotion of Evra in 2007, Evra and its generic equivalent continue to generate significant
sales.

We
believe that the rapid uptake and acceptance of Evra upon its introduction and its (and Xulane's) continued sales over the past several years demonstrate that there is an unmet market
need for multiple choices in transdermal contraceptive patches. Also, the epidemiologic data on VTE risk suggest that there is an unmet need for a contraceptive patch that delivers both a low dose of
EE similar to oral contraceptives and a first or second generation progestin.

Twirla is our lead product candidate, and substantially all of our resources are currently dedicated to seeking regulatory approval for Twirla.
We have halted all further work on our pipeline except for Twirla. We will require additional capital, should we choose to advance the development of our other potential product candidates.

Twirla
and each of our other potential product candidates utilize our proprietary Skinfusion technology, which is designed to provide advantages over the currently available patch.
Skinfusion is designed to deliver contraceptive levels of hormones to the blood stream through the skin over a seven-day period. It is also designed to optimize patch adhesion and patient wearability.
Twirla is a prescription CHC patch which contains both EE and LNG and is designed to deliver a low dose of EE and LNG
comparable to the total dose delivered with low-dose oral contraceptives. In addition to Twirla, we have plans to develop a potential pipeline of other new transdermal contraceptive products,
including AG200-SP, which is a regimen designed to provide shorter, lighter periods; AG200-ER, which is a regimen designed to allow a woman to extend the length of her cycle; AG200-ER (SmP), which is
a regimen designed to allow a woman to extend the length of her cycle and experience shorter, lighter periods; and AG890, which is a progestin-only contraceptive patch intended for use by women who
are unable or unwilling to take estrogen. AG200-SP, AG200-ER, and AG200-ER (SmP) are intended to be Twirla line extensions that would expand the use of Twirla beyond its initial, approved use. Based
upon a number of factors, including, but not limited to, our available capital resources and feedback from the FDA, we continue to review the clinical path and budgetary requirements for each of
AG200-SP, AG200-ER and AG890.

The
current status of our potential product candidate pipeline is summarized in the graphic below:

Twirla is a CHC patch which contains both EE and LNG. Twirla is designed to address an unmet medical need for increased compliance and improved
ease of use as compared to oral contraceptives. A single Twirla patch delivers the active ingredients LNG and EE over a seven-day dosing interval, and thereby eliminates the need to take a daily pill
as is necessary with an oral contraceptive. Twirla uses a traditional 28-day contraceptive regimen, where one patch is applied weekly for three consecutive weeks and then there is a fourth, patch-free
week in each 28-day time period. In clinical trials Twirla was applied to the buttock, abdomen or upper torso, but not the breast. Women in
our trials most frequently chose the buttock and abdomen for patch placement. The patch location should be rotated with each patch change. Twirla has demonstrated a therapeutically equivalent
pharmacokinetic profile when worn on the buttock, abdomen or upper torso. A drug's pharmacokinetic profile refers to the specific way in which a given drug is handled by the body over time, reflecting
the particular patterns of absorption, distribution and elimination of the drug in the body.

Twirla
is designed to be highly appealing to patients as a method of contraception. The patch is round and made of a soft, flexible fabric, designed to flex with the movement of a
woman's body. Twirla is a matrix patch consisting of several layers of material that contain the active ingredients EE and LNG, as well as the inactive ingredients Dimethylsulfoxide, Ethyl Lactate,
Capric Acid and Lauryl Lactate, which are ingredients to assist in the transport of EE and LNG across the skin, and adhesives that enable adherence to the skin. The final top layer is the one seen
when placed on the skin, and consists of a thin, cloth-like material consisting only of adhesive. There is a barrier formed between the inner portion of the patch, which contains the active
ingredients, and the outer portion of the patch, which only contains the adhesive. This barrier is intended to prevent the active and inactive ingredients from migrating to the peripheral portion of
the patch, and from breaking down the adhesive in that portion of the patch. Twirla is also designed to help prevent seepage of the adhesives from around the edge of the patch where it could collect
dirt and leave a sticky black ring on the skin. The six layers of the patch are integrated to create a patch which has a slim profile and is unobtrusive when applied. The results of multiple clinical
trials suggest that Twirla delivers the active ingredients needed for

contraception
over a seven-day period and that it remains adhered to the skin of most subjects for the full seven-day period, even under conditions of heat, humidity, showering, exposure to water and
vigorous exercise.

Twirla Patch Profile

The following table compares Twirla with the Evra product and its generic equivalent, Xulane, as stated in their labels, based upon
publicly-available information regarding the products and the characteristics of Twirla and other Twirla attributes observed in our completed Phase 3 clinical trials. We have not performed a
head-to-head comparison of Twirla to Evra.

Source
of Ortho Evra and Xulane data are U.S. prescribing information or package inserts.

**

The
Ortho Evra and Xulane package inserts indicate a strength of 35 micrograms of EE per day.

***

Most
common treatment emergent adverse events related to Twirla in three Phase 3 clinical trials.

Twirla
employs our Skinfusion patch technology, resulting in a unique appearance and feel of the patch. Evra/Xulane does not utilize Skinfusion technology; its active ingredients and
adhesives are dispersed to the edges of the patch. One frequent complaint about patches that do not utilize Skinfusion is that they collect dirt and lint and may leave a sticky black ring of residue
on the skin which can be difficult to remove. We do not have any direct comparison of the appearance of the patch on the skin at the end of seven days between Twirla and Evra/Xulane, but we believe,
based on anecdotal feedback from our clinical trial investigators, as well as on the differences in the design of the patches, that Twirla may have an advantage in this regard.

We
have not performed a head-to-head pharmacokinetic comparison of Twirla to Evra/Xulane, however, a study that we conducted with Twirla was similar in design to the pharmacokinetic
study conducted with Evra that provided the information regarding the daily amount of EE delivered that is currently in the Evra/Xulane package insert. The figure below combines the results for
average EE concentrations from these two studies and suggests a comparison of the observed blood concentration of EE for Twirla versus Evra versus observed and estimated data for the pill. The lower
amount of EE delivered from Twirla as compared to Evra can be observed. If Twirla is approved by the FDA, we will not be able to make direct comparative claims regarding the safety, efficacy or
pharmacokinetics of Twirla and Evra/Xulane, since none of our completed clinical trials studied Twirla in a head-to-head comparison with Evra/Xulane.

The
Evra curve presented in the graphic above was estimated based on the graph provided in the Evra label. In the legend to the figure above, "OC" refers to an oral contraceptive
containing 35 micrograms of EE. The OC data prior to Day 21 are estimated steady-state data based on Day 21 EE concentrations observed during our pharmacokinetic study.

Twirla
contains LNG, which is the progestin used as the reference standard when comparing risk of VTE between progestins. Evra/Xulane contains the progestin norelgestromin, which is a
prodrug of norgestimate, a third-generation progestin that has not demonstrated an increased risk of VTE independent of EE. We do not expect any meaningful clinical differences between Twirla and
Evra/Xulane based on the progestin component, but our market research with ObGyns has demonstrated that they perceive LNG to be one of the safest progestins available.

Twirla Product Profile

Assuming approval of our marketing application by the FDA based on the results of the SECURE trial, we believe a number of factors, including
clinical trial data from SECURE, support our future marketing of Twirla:



Twirla is a once-weekly contraceptive patch, designed to offer convenience and compliance.



Twirla is designed to meet the contraceptive needs and the busy lifestyles of today's women.



Twirla contains the active ingredients EE and LNG, both of which have been used in contraceptives for over 25 years.

Twirla was designed with Skinfusion technology, which has demonstrated adhesion over the seven-day wear period, even under conditions of heat,
humidity, showering, exposure to water and vigorous exercise.



Because Twirla contains the progestin LNG, we believe that the final approved label for Twirla will be consistent with the class labeling for
other contraceptives containing EE and LNG, including the class boxed warning.



Based on the results of the SECURE clinical trial, we believe it is possible the final approved label for Twirla may contain language on the
use of Twirla in women based on weight.

Twirla Clinical Development Program and Regulatory History

Our clinical program includes three Phase 1 studies, one Phase 2 study, and three Phase 3 studies, as well as other
supporting studies. In December 2016, we completed our third Phase 3 clinical trial, SECURE, in response to FDA comments and guidance.

Clinical Trials Completed prior to SECURE

In Phase 1 and Phase 2 clinical trials, we demonstrated that Twirla delivers levels of both EE and LNG to the blood stream that
are consistent with currently marketed low-dose oral contraceptives. In our Phase 3 clinical trials completed prior to SECURE, we demonstrated that Twirla was comparable to an approved low-dose
oral contraceptive in two randomized studies, one that enrolled over 1,500 women over 12 months and the other that enrolled over 400 women over six months. However, these studies were
not designed as non-inferiority studies and, as such, the comparative conclusions that may be drawn from these studies are limited. Across all completed clinical trials, Twirla was generally
well-tolerated and had a favorable safety profile. Because we relied, in part, on the FDA's findings of safety and efficacy from investigations for approved products containing EE and LNG and
published scientific literature for which we have not obtained a right of reference, we were not required to conduct preclinical studies. In the pharmacokinetic study comparing Twirla to an approved
low-dose oral contraceptive, results demonstrated that Twirla delivers a daily dose of EE that results in estrogen exposure similar to low-dose oral contraceptives containing approximately 30
micrograms.

Our
two Phase 3 trials completed prior to SECURE enrolled over 1,900 subjects to evaluate the safety and efficacy of Twirla. Each of these studies included an active comparator
arm with an approved
low-dose oral contraceptive. The results of these studies demonstrated that Twirla was generally well-tolerated, with levels of adverse events generally comparable to those of low-dose oral
contraceptives. In these studies, subjects had a higher rate of self-reported compliance when using the patch as compared with the group using oral contraceptives. However, as discussed further below,
the FDA issued a CRL in response to our original marketing application for Twirla and requested an additional Phase 3 study and additional chemistry manufacturing and control, or CMC,
information. The results of our prior clinical trials demonstrated that the patch generally remained adhered to the skin even when exposed to normal daily activities and conditions such as showering,
swimming and other forms of exercise, heat and humidity.

More
specifically, our safety population included subjects who received at least one dose of Twirla or COC. In this combined safety population of our two Phase 3 trials completed
prior to SECURE, there were a total of 22 serious adverse events, or SAEs, of which 16 were from the Twirla cohort, which had approximately 2.3 times as many subjects as the oral contraceptive
comparator cohort. Three of these SAEs (0.2% of the overall Twirla safety population) were considered to be possibly related to the study drug and included one drug overdose with
Benadryl®, one case of uncontrollable nausea and vomiting and one instance of upper extremity deep vein thrombosis. In addition to the SAEs described above, some subjects taking Twirla
experienced non-serious adverse events, such as nausea, headache, application site irritation and breast tenderness. Subjects receiving the oral contraceptive comparator

also
generally experienced similar non-serious adverse events such as nausea, headache, and breast tenderness, though at different rates. We believe that Twirla will have a label consistent with all
marketed low-dose CHC products, which include class labeling that warns of risks of certain serious conditions, including venous and arterial blood clots, such as heart attacks, thromboembolism and
stroke, as well as liver tumors, gallbladder disease and hypertension, and a boxed warning regarding risks of smoking and CHC use, particularly in women over 35 years old who smoke.

The
primary measure of efficacy for contraceptive trials is the Pearl Index. The pooled PI value in the previously completed Phase 3 trials for the Twirla patch was 5.76 and for
the combined oral contraceptive control arms was 6.72, which were higher than the range of 1.34 to 3.19 in pivotal studies conducted on products approved by the FDA in the previous ten years. In
addition, the upper bound of the associated 95% confidence intervals were higher than those seen in clinical trials used for registration of other approved combination hormonal contraceptives.

We
believe that the results for both the patch and oral contraceptive control arms in the two Phase 3 trials completed prior to SECURE were affected primarily by issues with study
conduct at several study sites, including rapid enrollment, which led to the inability to manage the study population, poor subject compliance, and high rates of loss to follow-up. In the larger of
our Phase 3 trials completed prior to SECURE, 96 sites enrolled subjects, 60 of which had no on-treatment pregnancies. Nineteen
percent of the on-treatment pregnancies reported during this trial came from one site. This site represented approximately 8% of the randomized subject population. Thirty-six percent of on-treatment
pregnancies were reported at four of the 96 sites. These four sites represented approximately 15% of the randomized subject population.

Experts
agree that the characteristic most likely to impact contraceptive failure and pregnancy rates is the subject's likelihood of using a method inconsistently or incorrectly.
Consistent with expert opinions, our analyses have suggested that the results for both the patch and oral contraceptive control arms in the two Phase 3 trials completed prior to SECURE were
also affected in part by the study population, which comprised a disproportionately higher number of new users and minority subjects, known to be at higher risk of noncompliance and pregnancy, as
compared to the majority of other recent CHC clinical trials for products that have gained approval in the United States.

2013 CRL and FDA Interactions

In February 2013, we received a CRL, or the 2013 CRL, from the FDA indicating that the results from our two completed Phase 3 trials
would not be sufficient for approval, and the FDA proposed that we conduct an additional Phase 3 trial. Among the comments expressed in the letter were some regarding the PI values seen in the
studies. Specifically, the FDA indicated that the PI values and the upper bound of the associated confidence intervals in the studies, in both the subjects using the Twirla patch and the control arm
using oral contraceptives, were higher than seen in clinical trials used for registration of other approved hormonal contraceptives. The confidence interval is a range around a measurement that
conveys how precise a measurement is. The FDA recommended that we conduct an additional Phase 3 trial with a simplified clinical trial design and improved study conduct, including enhanced site
monitoring and data collection procedures. The FDA also requested that we study Twirla in a representative sample of U.S. women who are seeking hormonal contraception, without enrollment restrictions
based on demographic characteristics such as contraceptive user status, age, race, ethnicity, and body mass index, or BMI. The FDA also required additional information relating to the laser etching of
label information on each patch and required that the patch used in the new trial utilize the same etching as will be used for the commercial product, in order to demonstrate that it does not
adversely affect the performance of the patch. Furthermore, the FDA also requested in the CRL additional information on controls and release specifications related to the patch, and manufacturing and
control information related to the Drug Master File of one of the raw materials in Twirla.

In
October 2013, we met with the FDA and received further guidance on requirements for our planned Phase 3 trial. In addition, we had a follow-up written interaction with the FDA
in February 2014 and received substantial written comments from the FDA in subsequent interactions. We enrolled the first subject in the SECURE clinical trial in the third quarter of 2014 and
completed the clinical trial in December 2016. The patches studied in the SECURE trial were laser etched using the same process as we anticipate for commercialization of Twirla, if approved. We also
continued to interact with the FDA on its CMC questions and continued additional supportive testing in order to respond to the FDA's CMC questions in the 2013 CRL.

The SECURE trial, our third Phase 3 Clinical Trial

SECURE, our third Phase 3 clinical trial, was a multicenter, single-arm, open-label, 13-cycle trial that evaluated the safety, efficacy
and tolerability of Twirla in 2032 healthy women, aged 18 and over, at 102 experienced investigative sites across the United States. The design and execution of SECURE was intended to address a number
of issues identified in the 2013 CRL, including but not limited to, improved clinical trial conduct and demonstration of efficacy as measured by an acceptable Pearl Index and related 95% confidence
interval in a representative sample of U.S. women who are seeking hormonal contraception, without enrollment restrictions based on demographic characteristics, such as contraceptive user status, age,
race, ethnicity, and BMI. The trial was designed in consultation with the FDA, and comprised a number of stringent trial design elements, including exclusion of treatment cycles not only for use of
back-up contraception but also for lack of sexual activity. SECURE had broad entry criteria, placed no limitations on body mass index, or BMI, or other demographic factors during enrollment, and
enrolled a large and diverse population from the United States in order to allow for efficacy to be assessed across different groups, as requested by the FDA. These entry criteria resulted in the
inclusion of a substantial number of women with high BMI, who have frequently been under-represented in past contraceptive studies. The efficacy measure for SECURE was the Pearl Index in an
intent-to-treat population of subjects 35 years of age and under. The FDA also requested inclusion of pre-specified efficacy analyses related to BMI and body weight.

We
began enrollment for the SECURE clinical trial in the fourth quarter of 2014, completed the clinical trial in December 2016, and announced top-line results in January 2017. A summary
of the final SECURE clinical trial results are as follows:



Consistent with its broad entry criteria, the SECURE clinical trial population was representative of the population of women in the United
States with respect to key demographic criteria, including:



Race (66.9% of subjects were white, 24.3% black and 8.8% other);



Ethnicity (19.7% were Hispanic, 80.3% non-Hispanic); and



BMI (39.4% of subjects had a normal baseline weight (BMI of under 25 kg/m2), 25.3% of subjects were overweight (BMI
of at least 25 kg/m2 but less than 30 kg/m2), and 35.3% were obese (BMI 30 kg/m2 or more). When classified as obese (BMI 30 kg/m2 or more) or
non-obese (BMI less than 30 kg/m2), 35.3% of subjects were obese and 64.7% were non-obese).



Both new and experienced hormonal contraceptive users were enrolled (9.4% of subjects were new users).



51.4% of subjects discontinued prematurely from the study, which is a lower discontinuation rate than our previous Phase 3 clinical
trials and in line with other Phase 3 clinical trials for approved hormonal contraceptives. The main reasons for subject discontinuation from the trial were subject decision (15.3%), adverse
event (10.9%), and loss to follow-up. The most common (>1%) adverse reactions leading to discontinuation were bleeding irregularities (2.2%) and any

application
site reaction (1.1%); all others were less than 1%. The loss to follow-up rate was 11.3%, which is in line with loss to follow-up rates observed in previous clinical trials of combined
hormonal products and substantially better than the 20% loss to follow-up rate observed in the larger of our previous Phase 3 trials.



The Pearl Index for the overall intent to treat population of subjects 35 years of age and under was 4.80 with an upper-bound of the 95%
confidence interval of 6.06. As with all hormonal contraceptive trials, the number of pregnancies included in our calculation of the Pearl Index is subject to review by the FDA as part of its overall
review of the NDA for Twirla.



Twirla was generally well-tolerated and had an overall favorable safety profile, consistent with publicly available information relating to
other low-dose combined hormonal products. The most frequent hormone-related adverse events, none of which were experienced by more than 5% of subjects, were generally in line with those events
observed in other low dose combined hormonal products and included:

Adverse Event

SECURE
Trial

Prior Agile
Phase 3
Trial*

Ortho Evra
Trials**

Quartette
Trial**

Total in Safety Population

2,032

1,043

3,322

3,597

Headache

4.3

%

3.7

%

21.0

%

12.2

%

Nausea

4.1

%

4.3

%

16.6

%

6.7

%

Breast tenderness/pain/discomfort

2.0

%

1.8

%

22.4

%

2.2

%

Mood swings/changes/depression

2.7

%

2.8

%

6.3

%

2.9

%

Heavy/irregular vaginal bleeding***

1.8

%

2.1

%

6.4

%

9.7

%

*

AEs
from the larger of our Phase 3 clinical trials completed prior to SECURE; all potentially hormone-related adverse events included regardless of investigator
confirmation of AE relatedness to study drug.

**

Information
is based on currently marketed product labels and publicly available information. We have not performed a head-to-head comparison of Twirla to Ortho Evra
or Quartette.

***

2.2%
of subjects in the SECURE trial discontinued due to a bleeding-related adverse event



The percent of subjects reporting bleeding-related adverse events was low, 2.6%, and only 2.2% of women discontinued for bleeding issues.



Overall serious adverse events, or SAEs, were observed in 2.0% of the SECURE trial study population, which is generally in line with those
observed in clinical trials for other low-dose combined hormonal products. For example, the rate in the Phase 3 clinical trial for Quartette was 1.6%. 0.6% of subjects in the SECURE trial had
SAEs that were considered potentially study drug related, including DVT or PE, gallbladder disease, ectopic pregnancy, and depression. In the combined safety database for our three Twirla
Phase 3 trials (n >3,000), there were 5 subjects with potentially study drug related DVTs or PEs, 4 of whom were obese
(BMI ³ 30kg/m2).



Overall, patch-related irritation and itching rates were low. Of reported patches worn, 83% had no patch site irritation and 65% had no
itching. Generally, reported irritation and itching was mild. Severe itching or irritation were observed in 2.3% and 1.5% of patches worn, respectively.



The patch adhesion profile was favorable with a low rate of detachment. Of reported patches worn, the range of detachments was 10% in cycle 1
and reduced to 2% by cycle 13.

We
believe that the efficacy results observed in SECURE were a reflection of the study population and the clinical trial design. As recommended by the FDA, we had broad entry criteria
for the trial and placed no limitations on BMI or other demographic factors during our enrollment. These entry criteria resulted in the inclusion of a substantial number of women with overweight and
obese BMI, who have frequently been under-represented in past contraceptive studies. As noted above, we observed that BMI had an effect on the efficacy results for Twirla. We believe these
observations require further analysis of whether there are other important factors at work here, such as race/ethnicity, user profile and compliance rates, which we believe may have impacted the
results of our prior Phase 3 studies.

In
2015, a meta-analysis entitled "Effect of Obesity on the Effectiveness of Hormonal Contraceptives: an Individual Participant Data
Meta-Analysis," was published by several FDA authors and focused on the issue of obesity and effectiveness of hormonal contraceptives, or HC, by showing a relationship between
obesity and efficacy was observed among subjects 35 years of age and under. We believe that the below results observed in SECURE are consistent with this observation:

BMI Category

BMI
(kg/m2)

% of Trial
Population

Pearl Index

Upper Bound
of 95% CI

Normal

< 25

39

%

3.03

4.62

Overweight

25 - < 30

25

%

5.36

7.98

Obese*

³ 30

35

%

6.42

8.88

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-Obese*

£ 30

65

%

3.94

5.35

Obese*

³ 30

35

%

6.42

8.88

*

In
its 2015 meta-analysis, the FDA examined the effect of obesity on two populations: non-obese (< 30 kg/m2) and obese
(³ 30 kg/m2). Non-obese includes subjects in the normal and overweight categories.

Furthermore,
the FDA's Individual Participant Data meta-analysis of pivotal Phase 3 clinical trials of CHCs suggested a 44% higher pregnancy rate during use of combined oral
contraceptives for obese women after adjusting for age and race. The authors of the paper highlighted the limitations of currently available prospective data due to historical exclusion of obese women
from contraceptive studies, calling for more data and additional analyses on obese women from Phase 3 clinical trials to allow further assessment of the effect of weight on the probability of
unintended pregnancy in women using HC. We believe our results from the SECURE clinical trial are consistent with the conclusions from the paper by the FDA scientists.

Additionally,
the observed PI values were not only impacted by the number of pregnancies that occurred in the study, but also by the number of cycles included in the analysis, which
affects the
denominator of the PI calculation. Cycles in which a subject was not sexually active, or in which a subject used a back-up method of contraception were not counted toward the number of cycles included
in the calculation of the PI. Many contraceptive clinical trials have not historically included these stringent requirements, in particular the exclusion of cycles for lack of sexual activity, in the
clinical trial design. As a result, we believe that the SECURE results reflect evidence of efficacy in a population representative of women who seek to use contraception in the United States.

The
highest PI for a hormonal contraceptive product approved by the FDA is 3.19 and the highest upper-bound of the 95% confidence interval of 5.03. As with all products, ultimate
approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific PI. For hormonal contraceptive trials, the
FDA generally evaluates safety and efficacy results of each individual study in the unique context of the study population and trial design. PIs for approved hormonal contraceptives have steadily
risen over time as study design and populations have changed. Numerous factors have likely contributed to these increases, including more frequent pregnancy testing with more sensitive tests, and
decreases in study-drug adherence among

study
populations. As experts have noted, with the growing enrollment of more diverse populations that appear to be increasingly representative of the likely actual users once the product is marketed,
contraceptive trials are yielding efficacy results that are ever closer to actual use contraceptive failure rates for methods requiring adherence.

In
SECURE, we employed several measures to improve study conduct and, in particular, improve upon the loss to follow up rate. These measures included selecting a highly experienced
contract resource organization, or CRO, selecting experienced sites, increasing and improving monitoring and training, and the use of electronic diaries for subjects. We engaged Parexel International
Corporation, or Parexel, a CRO with substantial experience in contraception studies and excellent site monitoring capabilities, as the CRO for the SECURE trial. We actively participated in site
selection and in monitoring subject recruitment, and actively participated in site monitoring and oversight of Parexel's activities throughout the length of the trial.

An
independent Pregnancy Review Committee composed of experts in early ultrasound was selected to review all pregnancies and determine on or off-treatment status, which affects the
numerator of the PI calculation. Accurate and timely pregnancy adjudication is critically important in order to reduce the likelihood that pregnancies which occur off treatment will be included by the
FDA during the review process. In order to avoid pre- or post-treatment pregnancies being included, every pregnancy was assessed via ultrasound as soon as possible and full data was collected
regarding the relationship of the pregnancy to the subject's use of Twirla. We did not have an independent Pregnancy Review Committee for our previous clinical trials.

In
December 2016, we completed the SECURE clinical trial, in which we enrolled over 2,000 women for up to one year of treatment. We announced top-line data in early January 2017. In
March 2017, at our request, we met with the FDA to share preliminary data from the SECURE clinical trial, including key safety data and BMI-related efficacy findings, and to seek FDA input as to
whether the SECURE clinical trial results constituted a basis for addressing the clinical deficiencies cited in the 2013 CRL. We also requested feedback on whether the proposed Twirla NDA content
would meet the FDA's requirements for submission. While the FDA did provide us with feedback on our proposed submission, the Agency did not provide any feedback on whether the results of the SECURE
clinical trial and the contents of the planned, resubmitted NDA would be sufficient to obtain regulatory approval of Twirla. In June 2017, we resubmitted our NDA for Twirla, which was assigned a
target Prescription Drug User Fee Act, or PDUFA, goal date of December 26, 2017.

2017 CRL

On December 21, 2017, after completion of its review of our Twirla NDA, the FDA issued the 2017 CRL and informed us that our resubmitted
NDA could not be approved in its present form. The FDA's reasons for issuing the 2017 CRL related to cited deficiencies in the manufacturing process for Twirla and questions about our clinical in vivo
adhesion properties. More specifically, the 2017 CRL identifies deficiencies relating to:



quality control adhesion test methods for the Twirla manufacturing process;



observations identified during an inspection of a facility of our third-party manufacturer, Corium, for the Twirla NDA that must be resolved;
and



questions on the in vivo adhesion properties of Twirla and their potential relationship to the
SECURE clinical trial results.

The
2017 CRL also contains recommendations on addressing the cited deficiencies including recommendations that the Company:



develop manufacturing in-process tests for ensuring the quality and in vivo adhesion of the
commercial scale product as well as the finished drug specifications and release test method for adhesion;



assess the in vivo adhesion properties demonstrated in the SECURE clinical trial; and



address the implications of clinical trial subject patch compliance and the withdrawal and dropout rates.

In
addition, the FDA also identified additional pregnancies, many of which were in women who had delays in applying patches, which they argued should be added to the Pearl Index
calculation. FDA expressed concern in the CRL regarding the implication of delays in patch application for real-world use. The 2017 CRL does not identify any specific issues relating to the safety of
Twirla.

At
our request, DBRUP had a Type A meeting with us on April 16, 2018 to discuss the deficiencies in the Twirla NDA identified in the 2017 CRL and the regulatory path for
approval of Twirla. In its official minutes, the FDA informed us that to address concerns surrounding in vivo adhesion we needed to reformulate the
transdermal system, conduct a formal in vivo adhesion study with the new formulation, and demonstrate bioequivalence to the data and information in the
original formulation. The FDA also said it anticipates discussing the safety and efficacy of Twirla at an Advisory Committee meeting to obtain input on whether the benefits of Twirla outweigh the
risks. The FDA also provided guidance on the path forward for addressing the manufacturing quality control test method issues related to Twirla, and informed us that whether these issues have been
adequately addressed would be subject to review by the FDA when we resubmit our Twirla NDA

Formal Dispute Resolution and Planned Resubmission

We disagreed with the FDA's conclusions regarding the in vivo adhesion properties of Twirla and
the need for product reformulation, and we submitted a formal dispute resolution request, or FDRR, to the FDA. In October 2018, the FDA's Office of New Drugs, or OND, formally denied our appeal, but
provided a path forward for resubmission of the NDA for Twirla that may not require that we reformulate Twirla or conduct a bioequivalence study between formulations, as previously suggested by DBRUP.
Specifically, OND suggested that we conduct a wear study to evaluate whether Twirla demonstrates a generally similar adhesion performance to Xulane, the generic version of the previously marketed
Ortho Evra® contraceptive patch, a product the FDA considers to have acceptable adhesion. If this result were demonstrated, OND stated that the study would support the conclusion of
adequate Twirla adhesion.

As
recommended by OND, we met with DBRUP to discuss the specific design and success criteria of the comparative wear study . DBRUP agreed that Twirla would be considered statistically
non-inferior to Xulane if the upper 95% confidence limit of the mean difference was less than +0.15. As agreed with DBRUP, we conducted a randomized, open-label, crossover adhesion study in healthy
women aged 18 to 35 years with a Body Mass Index of less than 35 kg/m2. Subjects were randomized to wear either Twirla or Xulane for the first week and then switched to the patch
not initially worn for the second week. The study design followed the 2018 ANDA Guidance for Assessment of Adhesion entitled Assessing Adhesion With Transdermal and Topical
Delivery Systems for ANDAs.

On
February 11, 2019, we announced the top-line results of the comparative wear study. The study met the non-inferiority criterion set forth by the FDA by demonstrating an upper
95% confidence limit of 0.16. Additional analyses pertaining to secondary endpoints and safety data are ongoing:

Primary endpoint: mean adhesion scores for Twirla and Xulane

Difference (TwirlaXulane)

Twirla

Xulane

One-sided
upper 95% CL

Non-inferiority
criterion met

N

Mean (SD)

N

Mean (SD)

Mean (SD)

Adhesion score in the Per protocol population

77

0.14 (0.28

)

77

0.39 (0.40

)

0.25 (0.23

)

0.16

Yes

Non-inferiority Scale

We
plan on resubmitting our Twirla NDA in the second quarter of 2019. Our planned resubmission is intended to be a complete response to the 2017 CRL and will include the results from the
comparative wear study, additional information on our manufacturing process, and other analyses responding to the 2017 CRL. Following the resubmission, we anticipate that FDA will likely re-inspect
our contract manufacturer, Corium, and hold an Advisory Committee meeting to review of the safety and efficacy of Twirla.

Twirla Line Extensions and Other Potential Product Candidates

In addition to Twirla, our potential product pipeline consists of two classes of product candidates: Twirla line extensions and other
transdermal contraceptive product candidates. These potential product candidates are designed to address market needs and offer additional non-daily contraceptive options. Based on the results of our
market research on line extension regimen concepts conducted in December 2016, we believe that our potential line extension product candidates are commercially viable and could garner a share of the
contraceptive market.

The
hormonal contraceptive market has a long history of manufacturers successfully using line extensions to extend the lifecycle of a brand, often by gaining additional exclusivity
periods for the product extension under the provisions of the Hatch-Waxman Act and/or with additional patents. Our lifecycle strategy with Twirla is to introduce line extensions that will have
exclusivity for some time period, either due to our intellectual property estate, or due to Hatch-Waxman exclusivity. The line extensions in our pipeline include using our Skinfusion technology to
allow a 28-day regimen where women will experience shorter, lighter withdrawal bleeding, as well as extending the cycle beyond the typical 28-day regimen to allow women to experience fewer withdrawal
bleeds each year. In addition, the potential line extension product candidates in our pipeline will utilize a unique aspect in the regimen, where a smaller patch, or SmP, that delivers a lower dose of
both EE and LNG will be worn during the final seven days of each cycle, rather than having a patch-free week, to allow for withdrawal bleed while minimizing hormonal fluctuations and potentially the
side effects that accompany changes in hormone levels. These regimens are protected by patents issued to us in 2015. A study to examine

the
pharmacokinetics and pharmacodynamics of the SmP will be required prior to advancing the potential line extension product candidates through clinical development.

Our
Twirla line extensions include the following:



AG200-ER is an extended cycle regimen utilizing our current patch product designed to allow a woman to extend the time between her episodes of
withdrawal bleeding and thus have fewer periods per year. There are several currently approved oral contraceptives that provide an 84- or 91-day extended cycle regimen. However, there is no approved
contraceptive patch product offering an extended cycle regimen. AG200-ER is a contraceptive patch which is designed to address the limitations of the currently approved extended regimen oral
contraceptives by providing a more convenient, weekly dosing schedule. AG200-ER utilizes the same drug product as Twirla during the active phase of the cycle. We are currently evaluating the optimal
cycle length to advance into Phase 3 clinical development.



AG200-SP is a 28-day regimen designed to provide users with shorter, lighter withdrawal bleeds and potentially improve contraceptive efficacy.
AG200-SP may also provide benefit in patients with sensitivity to abrupt changes in hormone levels. Oral contraceptives that use a shortened hormone-free interval, or SHFI, by delivering hormones
beyond 21 days comprise a significant share of U.S. branded TRx volume, demonstrating high acceptability among patients and providers. AG200-SP is designed to provide a simplified 28-day
regimen through use of the same drug product as Twirla for the first three weeks of the cycle, and a smaller lower-dose patch, or SmP, in the fourth week, which will allow patients to continuously
apply patches without interruption. AG200-SP requires additional patch development work on the SmP prior to potentially conducting a pharmacodynamics and pharmacokinetic study.



AG200-ER (SmP) is an extended cycle regimen utilizing our current patch product and the SmP that is designed to allow a woman to extend the
time between her episodes of withdrawal bleeding and experience shorter, lighter periods. By adjusting the length of the contraceptive cycle, AG200-ER (SmP) is designed to potentially minimize
breakthrough bleeding and spotting, which is a commonly reported concern with patients using an extended regimen contraceptive product. AG200-ER (SmP) utilizes the same drug product as Twirla during
the active phase of the cycle and will utilize the SmP during the final week of the cycle. AG200-ER (SmP) requires additional patch development work on the SmP prior to potentially conducting a
pharmacodynamics and pharmacokinetic study.

Our
other potential product candidate is a P-only contraceptive patch described below:



AG890 is an LNG-only contraceptive patch, intended for use by women who are unable or unwilling to take estrogen, including those who are
breastfeeding or who are at greater risk of VTE, such as women who smoke, are over 35 years of age, or who are obese. Currently, the P-only market consists of pills and several non-oral
options, including IUDs, implants, and injections. AG890 is intended to fulfill an unmet medical need for a non-daily, easily reversible form of contraception in the P-only market. We have conducted a
Phase 1 clinical trial with AG890. In addition, the National Institutes of Health, through a clinical trial agreement with us, conducted a Phase 1/2 trial with AG890. The Phase
1/2 study was a multicenter study to evaluate the pharmacokinetics, safety, and mechanisms of potential contraceptive efficacy of AG890. The trial is complete, and we continue to
evaluate the findings. Once we have completed our analysis of the data, it is possible that additional patch development work for dose selection may be required, including additional Phase 1
and Phase 2 studies to determine the optimal formulation and dose to advance to Phase 3.

We do not expect to be required to conduct preclinical studies for any of these potential product candidates. Based upon a number of factors, including, but not
limited to, our available capital resources and feedback from the FDA, we continue to review the clinical path and the budgetary requirements for each of these three potential product candidates.
Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We have halted all further work on our pipeline except for Twirla. We will require
additional capital should we choose to advance the development of our other potential product candidates.

Sales and Marketing

Twirla Commercialization Strategy

In January 2018, following our receipt of the 2017 CRL, we significantly scaled back our preparations for commercialization of Twirla, including
commercial pre-launch and manufacturing validation activities, pending our ability to address the 2017 CRL and receive approval of Twirla. However, if Twirla is approved, we expect to build a sales
and marketing infrastructure in the United States to support the launch of Twirla for contraception. We anticipate that a targeted sales force focused initially on ObGyns, NPs, PAs and primary care
providers who comprise the top prescribers of contraceptives will be highly effective. Outside the United States, in the future we may decide to commercialize Twirla, if approved, by entering into
third-party collaboration agreements with pharmaceutical partners. We will require additional capital to fully implement our commercialization plan for Twirla, if approved.

Twirla Promotion Strategy

We have employed several key strategies during the development of Twirla to prepare us for the launch of Twirla. These
include:



Seeking advice and input from key opinion leaders, or KOLs, in women's health and contraception;



Establishing relationships with women's health advocacy groups;



Conducting extensive market research to better understand the market dynamics and identify product positioning and messages for Twirla with
prescribers and consumers;



Assuring that data from our clinical trials are presented in a timely manner at clinical congresses and published in appropriate peer-reviewed
medical journals; and



Developing and registering the trademark Twirla and developing key branding elements, including packaging design for submission with the NDA.

ObGyns,
NPs and PAs combine to write most CHC prescriptions, with ObGyns primarily driving prescriptions in the category. We plan to focus the promotion of Twirla on these key
prescribers and other key customer groups, including consumers and commercial managed care plans. We believe that we can deploy a focused sales force effort targeting the approximately 22,000
prescribers responsible for 80% of branded CHC prescriptions. We believe that this universe of branded prescribers can be covered adequately by a specialty sales force of between 70 and 100 total
representatives. In areas of the country where it is not efficient to deploy a sales representative, remote promotion can be used to reach these prescribers.

We
plan to deploy patient promotion at the launch of Twirla, both in the physician's office, and through targeted media campaigns. We plan to use both branded and unbranded campaigns to
create awareness of Twirla among consumers. We believe there are cost-effective means to reach our target demographic of females aged 18 to 34 years, primarily the so-called Millennials, who
engage in online activities to a high degree and are more likely to seek health information online and through social

networks.
Traditional mass-market direct-to-consumer advertising on television may not be required to reach these consumers. Marketing tactics aimed at today's female consumer need to be optimized for
mobile technology, because smartphones and text messaging are the preferred means of communication. We believe that a focused consumer promotion plan that uses digital media and other mass-market
advertising vehicles will generate consumer awareness and demand for Twirla if approved.

Managed
care plans have traditionally used differential co-pays to attempt to drive patients to use either generic products or products for which they have a contract with the
manufacturer. Many plans encourage patients to obtain their branded contraceptives through mail-order, incentivizing them with a 90-day co-pay that is often less on a per-month basis than that for a
30-day supply. Most manufacturers of contraceptive brands offer a coupon to patients covered by non-governmental payors to offset the
difference in co-pay between a generic and Tier 2 or Tier 3 for their promoted brands. These co-pay coupons are a useful tactic to overcome barriers to initiating therapy in such
patients. When used in conjunction with product samples given out by the physician, a co-pay coupon often allows the patient to then fill their first prescription for free or at a steep discount and
limits the out of pocket expenditure for the patient for several months. This co-pay assistance creates brand loyalty, particularly for a brand where there is no generic alternative. We believe that
we will be able to use free product samples and co-pay coupons or vouchers at the time of Twirla's launch to drive use of the product by patients covered by non-governmental payors while we are
negotiating contracts with select commercial health plans and awaiting formulary review. In addition, we believe the enactment of the ACA, and specifically the requirements for contraceptive coverage
required by the ACA, provides a favorable managed care environment for Twirla. The ACA requires all insurers to provide at least one product in each of the 18 methods referenced in the FDA Birth
Control Guide with no cost-sharing to the patient, including no co-pays, coinsurance, or deductibles. The FDA Birth Control Guide lists "Patch" as a unique method, therefore insurers must provide
access to at least one contraceptive patch product with no cost-sharing to the patient. Currently, there is only one other patch product available on the market, Xulane (the generic version of Ortho
Evra). We believe Twirla will be well-positioned to be the no-cost patch option on formulary, either based on its clinical profile, or based upon negotiated rebates and discounts. In addition, we
expect to be able to provide co-pay assistance in the form of a coupon for patients on plans where Twirla requires a co-pay.

On
January 20, 2017, the administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions
from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of
pharmaceuticals or medical devices, among others. Congress also could consider subsequent legislation to repeal and replace elements of the ACA that are repealed. Additionally, in October 2017, the
Department of Health and Human Services, jointly with the Department of Labor and the Treasury, issued two interim rules outlining exemption processes for employers not wanting to offer contraceptive
coverage based on their religious beliefs or sincerely held moral convictions. While there is an injunction against the administration prohibiting it from implementing these rules, the ultimate
outcome of that litigation cannot be predicted. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our business. We will continue to monitor
the healthcare reform efforts and agency implementation. While there is uncertainty about the specific effects of healthcare reform, we expect to be able to compete in either a managed care
environment that maintains elements of the ACA that require contraceptive coverage or an environment that requires negotiated rebates and discounts.

Market Research

We have conducted market research with healthcare professionals (HCPs), consumers and managed care decision-makers to determine market drivers,
unmet needs and the reaction to the Twirla

product
profile. A total of over 800 healthcare professionals and over 3,300 consumers have participated in our market research on Twirla and the contraceptive market. We also had an independent
third-party commercial consulting firm confirm our market research. The main findings of our market research conducted in December 2016 and confirmed in June 2017 are discussed below.

HCPs admit to presenting oral contraceptives first, ostensibly because of their long history of safety and the HCPs own comfort
with the pill



Patient ability to comply drives hormonal contraceptive choice



HCPs believe patient engagement in the choice increases personal investment in her birth control and enhances adherence



Determinants of choice are willingness/ability to be responsible to take/apply birth control, desire to control menses, and
tolerance for insertion or injection



The Pearl Index, or PI, is not cited as an important factor driving contraceptive choice and it is not a well understood measure. Efficacy is a
given and all hormonal contraceptives are expected to be efficacious



HCPs consider BMI in their prescribing, however one third of HCPs consider efficacy in women with high BMI a least important attribute



Young women with busy lives, susceptible to "forgetting" daily contraceptives, are a strong target audience for the Agile patch portfolio

Two
of our market research studies have included an allocation exercise to estimate the potential uptake of Twirla and peak market share. In both of these studies, ObGyns and NPs
indicated their allocation of contraceptive prescriptions before and after reviewing a product profile like Twirla that reflects the safety and efficacy results from our SECURE clinical trial. In the
2010 study, which was conducted prior to the implementation of the ACA, ObGyns estimated use of a product like Twirla in 17% of their CHC patients. A proprietary calibration model developed by the
research firm was applied to the peak share estimate, to adjust for physician overstatement, resulting in an estimated peak market share of 9% of the CHC market. In the most recent study completed in
December 2016, ObGyns and NP/PAs estimated use of Twirla in 22% of their CHC patients, which was also calibrated to adjust for overstatement, resulting in an estimated peak market share of 14% of the
CHC market.

Even
with the evolving healthcare landscape, we continue to believe a peak CHC market share of 6-9% can be achieved with Twirla within seven years of launch, allowing us time to
establish a presence in the CHC market and to overcome any perceptions or barriers among prescribers due to the past history of Evra and to account for potential changes in the ACA and overall
healthcare landscape.

Topline Summary of Our Consumer Market Research:



Familiarity and availability sway hormonal contraceptive selection initially toward the pill. Few explore choices extensively through dialogue
with HCP, and/or research of their own. Thus, HCP recommendation can be very influential. However, with time and experience, many become disenchanted with the pill because it ties them to a daily
schedule.



Among those who least prefer the contraceptive patch option, their strong impressions, despite extremely limited exposure to the contraceptive
patch, were based on issues such as skin irritation from adhesive, blood clots, and weight gain.

Several mention a desire to have a hormonal contraceptive, or HC, method that fits in with their busy lifestyle while still offering control
over the HC-taking experience (i.e., unlike implant/IUD which is inserted and forgotten).



Twirla offers a convenient, less-frequent form of HC that women are interested in trialing for themselves



Potential downsides are patch cleanliness/appearance and adhesion (particularly while showering or exercising), but women admit
they couldn't gauge this without trying the patch first.



Based solely on the Twirla product profile that reflects the safety and efficacy results from our SECURE clinical trial, approximately 15% of
women surveyed in the 2016 Adelphi study indicated they would be "extremely likely" to ask their doctor for a prescription for Twirla.

Topline Summary of Our Managed Care Market Research:

The managed care research summarized below was conducted with medical and pharmacy directors in September 2016. In regard to forward-looking
questions, subjects were asked to assume that the ACA and Contraceptive Mandate would still be in effect.



Payers are not highly focused on the prescription contraceptive market, and knowledge of individual prescription products was low.



The category is mainly managed by tier and, to a smaller degree, by closed formularies.



20% of plans abandoned all management efforts in the category and allowed coverage of all generics and all unique brands at a $0 cost share.



All respondents indicated they would consider working with a manufacturer to make one product preferred in a contraceptive category. However,
preferred status could be in "name only", as many of the preferred products had the same $0 co-pay as non-preferred products.



Net cost is the most important pricing baseline, but rebates for many plans are still considered a profit center. Most plans would entertain
preferred or co-preferred status in return for a modest contract.



7 of the 10 respondents reacted to the Twirla product profile positively, while 3 responses were neutral. Most indicated the comparator was
Xulane, and that a comparable price with an improved safety profile would result in equivalent coverage.

Competition

The industry for contraceptive products is characterized by intense competition and strong promotion of proprietary products. While we believe
that our Skinfusion technology provides us with a competitive advantage, we face potential competition from many different sources, including large pharmaceutical companies, specialty pharmaceutical
and generic drug companies, and medical device companies. Any product candidates that we successfully develop and commercialize will compete with existing products and new products that may become
available in the future.

We
face competition from a variety of non-permanent birth control products. There are non-hormonal barrier methods, such as the contraceptive sponge, diaphragm, cervical cap or shield
and condoms. Then, there are hormonal methods, which is the category for our potential product candidates, such as oral contraceptives, injections, implants, hormonal IUDs and vaginal ring and
transdermal contraceptive products.

Although
there are over 200 CHC products, including brands and generics, just eight branded products, make up approximately half of total market sales. Our potential competitors include
large, well-established pharmaceutical companies, and specialty pharmaceutical sales and marketing companies. The branded products with established market presence include, Nuvaring®,
marketed by Merck, the only contraceptive vaginal ring available on the market, the Loestrin® franchise, marketed by Allergan (formerly known as Actavis), consisting of three oral
contraceptives, Minastrin® 24, LoLoestrin® and Taytulla®, and Beyaz®, Yaz®, Yasmin® and Natazia® marketed by Bayer.
Although not a branded product, Xulane, the generic to Ortho Evra and the only patch currently available on the market, generated $233 million in sales for Mylan in 2017. Additionally, several
generics manufacturers currently market and continue to introduce new generic contraceptives, including Sandoz, Glenmark, Lupin, Amneal and Mylan. Based on the market experience of other non-oral CHC
dosage forms, including Evra and Nuvaring, we believe there is a continuing demand for an innovative transdermal contraceptive patch that can provide convenience in a low-dose transdermal format.

There
are other hormonal contraceptive products, recently approved or in development that may compete with Twirla and our other potential product candidates. Annovera, a
vaginal ring from the Population Council, Inc., was approved on August 10, 2018. The Population Council also has a transdermal gel contraceptive in Phase 2, developed in
collaboration with Antares Pharma, Inc. Other companies that have new hormonal contraceptive products in various stages of development include Bayer, with a contraceptive patch and a P-only
vaginal ring, both in Phase 3 development. Allergan has a P-only ring for which they received a CRL from the FDA. In November 2018, the FDA accepted Exeltis' filing for a progestin-only oral
contraceptive. Mithra Pharmaceuticals SA announced Phase 3 data for a combination oral contraceptive in January 2019. In the past few years, some of the large pharmaceutical companies
such as Johnson & Johnson, Pfizer, and Teva have dissolved their women's health specialty marketing and sales teams, and Bayer has shifted their focus away from their CHC products to their IUD
franchise.

We
are aware of only one other CHC transdermal patch in development. This patch is being developed by Bayer, and contains the active ingredients EE and gestodene, a third-generation
progestin. Bayer has stated that their gestodene patch is small, round, and transparent, and delivers a daily EE dose comparable to a 20 microgram EE oral contraceptive. Phase 3 studies of the
Bayer gestodene patch began in 2004, and they completed a Phase 3 efficacy trial in the United States in December 2010. Bayer also completed Phase 3 efficacy trials in the European
Union, or E.U., and Latin America in September 2011, submitted a marketing application to the E.U. in September 2012, and received approval to market the gestodene patch in the E.U. in February 2014.
At the time of the E.U. submission, Bayer reported that they were in talks with the FDA regarding a U.S. submission, but there has been no further public information regarding a U.S. submission or
approval, and the most recent Bayer pipeline information does not list the gestodene patch.

To
date, there are no contraceptives containing gestodene available in the United States. We are aware that Wyeth was developing oral contraceptives containing gestodene in the late
1980s, with an NDA filed for an oral contraceptive containing gestodene and EE in 1988, and Wyeth planned filing an NDA for a second oral contraceptive containing gestodene in 1991. These products
were never approved, and in a Wyeth pipeline report from 1996, there was no mention of any gestodene-containing product candidates among its contraceptives in development. Although not available in
the United States, gestodene has been widely used outside the United States for a number of years. As with other third generation progestins, epidemiologic studies have reported a two-fold increase in
risk of VTE with contraceptives containing gestodene compared to those containing LNG. We believe that if Bayer were to obtain FDA approval for the gestodene patch, the approved labeling may contain
the same language that products containing third generation progestins have, which states that these contraceptives have a two-fold increase in risk of VTE as compared with contraceptives containing
second generation progestins.

We do not own any manufacturing facilities. We currently rely, and expect to continue to rely, on a third party for the manufacture of our
product candidates for clinical trials, as well as for commercial manufacture if any of our potential product candidates receive marketing approval. In 2006, we entered into an exclusive agreement
with Corium to develop Twirla using our Skinfusion technology, and also for AG890, which is a P-only contraceptive patch in Phase 1/2 of clinical development. Our Corium agreement is an
exclusive arrangement until Corium has commercially produced a significant, agreed-upon quantity of patches, currently projected to occur no earlier than five years following commercial launch of
Twirla. Pursuant to the terms of our agreement, Corium is required to use commercially reasonable efforts to maintain sufficient manufacturing capabilities to supply the quantities of Twirla required
for its initial commercial launch and commercial sales thereafter. Corium needs to complete the validation of the commercial manufacturing process for Twirla, if approved, and potentially further
expand its manufacturing capabilities to be capable of supplying projected commercial quantities of Twirla, if approved. In 2018 Corium was acquired by Gurnet Holding Company, or GHC. Following
completion of the transaction, Corium became a private company, wholly owned by GHC. Corium has announced that it plans to continue its operations in Grand Rapids, Michigan, where Twirla is expected
to be commercially manufactured, if approved, and where clinical Twirla supply is manufactured.

As
discussed in more detail above, the 2017 CRL identified deficiencies relating to quality control adhesion test methods which are part of the manufacturing process for Twirla. The 2017
CRL also noted that observations identified during a pre-approval inspection, or PAI, of Corium's facility for the Twirla NDA must be resolved. On November 20, 2017 and December 1, 2017,
Corium provided the FDA
with responses to each of the observations made during the FDA's facility inspection, which included a PAI for Twirla. Along with Corium, we are continuing to enhance our quality control test methods
that were submitted in December 2017 in a way that we believe will address the issues identified by the FDA in both the 2017 CRL and the Corium facility inspection and that will allow us to continue
to use our current commercial manufacturing process for Twirla. The sufficiency of Corium's responses to each of the observations made during the FDA's facility inspection in 2017, as well as our
responses concerning the quality control adhesion test methods and specifications, will be evaluated by the FDA after we resubmit the NDA for Twirla. We expect the validation and expansion of the
commercial-scale manufacturing process to be completed in coordination with our other planned commercialization activities. Corium is responsible for all aspects of Twirla manufacturing.

Strategic Agreements

Agreement with Corium

Pursuant to our manufacturing agreement, Corium's exclusive right to manufacture Twirla and AG890 extends until Corium has commercially produced
a significant, agreed-upon quantity of patches, currently projected to occur no earlier than five years following commercial launch of Twirla, at which point the agreement will expire. Under the terms
of our agreement, we will pay Corium a defined price per finished patch, whether used for samples or commercial sale. We will owe no royalties to Corium in connection with the production of finished
patches. The contract may be terminated by either party for the other party's uncured material breach. Following the end of the exclusivity period, if we were to seek a second source of supply, we
would be required to obtain FDA approval through an NDA supplement for an additional manufacturing site(s). The process of acquiring a second source of supply and obtaining FDA approval generally
takes two years or more and would require us to make substantial investments in new facilities and equipment.

Under
our agreement, Corium has performed process development and manufacturing of Twirla for each of our clinical trials. For the development work performed, we paid Corium for time and

materials
related to the achievement of certain development goals. To date, we have made approximately $1.7 million of milestone payments to Corium, all of which were paid between the years
2006 and 2009. Corium is not eligible for any milestone payments in the future. During 2012, we paid Corium an aggregate of $3.5 million towards leasehold improvements incurred by Corium to its
facilities to provide for adequate manufacturing space for our product candidates.

In
order to accommodate our anticipated commercial launch of Twirla, if approved, Corium has completed a substantial build-out of its facilities in Grand Rapids, Michigan, and it has
installed over $10.0 million of equipment we purchased. This additional equipment and these facilities may require FDA pre-notification, pre-approval or inspection before being used to
manufacture commercial product.

Reimbursement

Managed care plans have traditionally used differential co-pays to attempt to drive patients to use either generic products or products for
which they have a contract with the manufacturer. Typically, a managed care plan's formulary is organized into between three and six tiers. Each tier is then associated with a set range of co-pay
amounts, with products in the lower tiers having a lower co-pay. Many plans encourage patients to obtain their branded contraceptives through mail-order, incentivizing them with a 90-day co-pay that
may be less on a per-month basis than that for a 30-day supply. Contraceptive brands are generally placed on Tier 2 only if there is a contract with the plan, although there are a few plans
that place several branded products on Tier 2.

Prior
to May 2015, managed care plans have individually interpreted the requirement for coverage of contraceptives under the ACA. Some plans have designated that all contraceptives
containing the same progestin are equivalent, and therefore only cover a select few products containing each progestin, usually the least expensive generics, with no co-pay. Other plans have defined
contraceptive methods into categories such as "hormonal", "emergency contraception", and "barrier methods", and they cover just one product for each method with no co-pay. In May 2015, a clarification
in the form of an FAQ was issued by the applicable government agencies (HHS, DOL, and Treasury) which clarified the requirements for coverage of contraceptives under the ACA. The FAQ states that plans
and issuers must cover without cost-sharing at least one form of contraception in each of the 18 methods the FDA has identified for women in its current Birth Control Guide. The patch is identified as
a specific method in the FDA Birth Control Guide, and therefore insurers must cover at least one patch product with no cost-sharing to the patient. Because this clarifying guidance is applied for plan
years (or in the individual market, policy years) beginning on or after 60 days from the date of publication of the FAQs, patients did not have the benefit of this clarification until their new
plan year, which generally started in January 2016.

On
January 20, 2017, the administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions
from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of
pharmaceuticals or medical devices, among others. Congress also could consider subsequent legislation to repeal and replace elements of the ACA. Additionally, in October 2017, the Department of Health
and Human Services, jointly with the Department of Labor and the Treasury, issued two interim rules outlining exemption processes for employers not wanting to offer contraceptive coverage based on
their religious beliefs or sincerely held moral convictions. While there is an injunction against the administration prohibiting it from implementing these rules, the ultimate outcome of that
litigation cannot be predicted. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our business. We will continue to monitor the healthcare
reform efforts and agency implementation.

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other
things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products such
as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations,
require the expenditure of substantial time and financial resources.

FDA Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The
process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and
financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a
variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold or
termination, issuance of Warning, Untitled, or Cyber Letters, requests for product recalls, product seizures or detention, total or partial suspension or restriction of production, marketing or
distribution, injunctions, fines, debarment, refusal to allow the import or export of product, adverse publicity, modification of promotional materials or labeling, refusals of government contracts,
exclusion from participation in federal and state healthcare programs, restitution, disgorgement, imprisonment, consent decrees and corporate integrity agreements, or civil or criminal penalties.

The
process required by the FDA before a drug may be marketed in the United States generally involves the following:



Completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA's Good Laboratory Practice, or
GLP, regulations;



Submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before human clinical trials may begin;



Approval by an independent Institutional Review Board, or IRB, for each clinical site before each trial may be initiated;



Performance of human clinical trials, including adequate and well- controlled clinical trials, in accordance with cGCPs to establish the safety
and efficacy of the proposed drug product for each indication;



Submission to the FDA of an NDA;



Satisfactory completion of a FDA advisory committee review, if applicable;



Satisfactory completion of a FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance
with FDA requirements for product manufacturing and to assure that the facilities, methods and controls are adequate to preserve the drug's identity, strength, quality and purity, as well as the
potential for completion of a FDA inspection of selected clinical sites to determine cGCP compliance; and

Preclinical studies include laboratory evaluation of drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as
animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical
data and any available clinical data or literature, among other things, to the FDA as part of an IND, unless the sponsor is relying on prior FDA findings of safety or efficacy of the drug product, in
which case, some of the above information may be omitted. Some preclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by
the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such a case, the IND sponsor and the
FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

Clinical trials involve the administration of an investigational new drug to human subjects under the supervision of qualified investigators in
accordance with cGCP requirements, which includes the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, and the review
and approval of the study by an IRB. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the trial procedures, the parameters to be used in
monitoring safety and the efficacy criteria to be evaluated and a statistical analysis plan. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as
part of the IND. In addition, an IRB for each clinical trial site participating in the clinical trial must review and approve the plan for any clinical trial before it commences, and the IRB must
continue to oversee the clinical trial while it is being conducted, including any changes.

Human
clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In Phase 1, the drug is initially introduced into healthy human
subjects or subjects with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial indication of
its effectiveness. In Phase 2, the drug typically is administered through controlled studies to a limited subject population with the target disease or condition to identify possible adverse
effects and safety risks, to preliminarily evaluate the efficacy of the drug for specific targeted diseases and to determine dosage tolerance and optimal dosage. In Phase 3, the drug is
administered to an expanded subject population, generally at geographically dispersed clinical trial sites, in two adequate and well-controlled clinical trials to generate enough data to statistically
evaluate the efficacy and safety of the product candidate for approval, to establish the overall risk-benefit profile of the product candidate and to provide adequate information for the labeling of
the product candidate. In the case of a 505(b)(2) NDA, which is a marketing application in which sponsors may rely on investigations that were not conducted by or for the applicant and for which the
applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted, some of the above-described studies and preclinical studies may not be required
or may be abbreviated. Bridging studies may be needed, however, to demonstrate the applicability of the studies that were previously conducted by other sponsors to the drug that is the subject of the
marketing application. In addition to the above traditional kinds of data required for the approval of an NDA, the 21st Century Cures Act, provides for FDA acceptance of new kinds of data such
as such as patient experience data, real world evidence for already approved products, and, for appropriate indications sought through supplemental marketing applications, data summaries.

In
addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active ingredient, indication, dosage form, dosage regimen or route of
administration must contain data that are adequate to assess the safety and efficacy of the drug for the claimed

indications
in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own
initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the
pediatric data requirements. We have obtained a waiver from the conduct of a PREA study.

The
manufacture of investigational drugs for the conduct of human clinical trials is subject to FDA product manufacturing requirements. Investigational drugs and active pharmaceutical
ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the
United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FDCA.

Progress
reports detailing the results of the clinical trials must be submitted at least annually to the FDA and the IRB and more frequently if serious adverse events occur. Information
about certain clinical trials, including a description of the study and study results, must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public
dissemination on their ClinicalTrials.gov website. Failure to submit the required information to ClinicalTrials.gov can result in monetary penalties. Marketing application applicants must also report
certain investigator financial interests to FDA.

Phase 1,
Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may
suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or
terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB's requirements or if the drug has been associated with unexpected
serious harm to subjects. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board
or committee. This group regularly reviews accumulated data and advises the study sponsor regarding the continuing safety of trial subjects, potential trial subjects, and the continuing validity and
scientific merit of the clinical trial. We may also suspend or terminate a clinical trial based on evolving business objectives or competitive climate.

U.S. Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, including negative or
ambiguous results as well as positive findings, together with detailed information relating to the product's chemistry, manufacture, controls and proposed labeling, among other things, are submitted
to the FDA as part of an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is subject to a substantial application user fee. These user
fees must be filed at the time of the first submission of the application, even if the application is being submitted on a rolling basis. A user fee for the Twirla contraceptive patch was submitted
with the original NDA. Application resubmissions by the same applicant do not require a new application fee. Under the PDUFA, guidelines that are currently in effect, the FDA has agreed to certain
performance goals regarding the timing of its review of an application. The FDA's standard review goal is to act on 90% of all Non-New Molecular Entity applications within ten months of FDA receipt of
the application. These time periods may be extended by the FDA should an applicant submit new information to the agency during the course of FDA's review of the marketing application. The time period
is also only a goal and may not be met by the FDA.

The
FDA conducts a preliminary review of all original NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently
complete to

permit
substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be submitted again with the additional information and
is also subject to review before the FDA accepts it for filing.

Once
the submission is accepted for filing, the FDA begins an in-depth substantive review to determine, among other things, whether the drug is safe and effective and whether the
facility in which it is manufactured, processed, packaged or held, as well as the manufacturing processes and controls, meet standards designed to ensure the product's continued safety, quality and
purity.

The
FDA may refer a marketing application to an external advisory committee for questions pertaining to issues such as clinical trial design, safety and efficacy, and public health
questions. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee,
but it typically follows such recommendations and considers such recommendations carefully when making decisions.

Before
approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured, referred to as a Pre-Approval Inspection. The FDA will not approve an
application unless it determines that the manufacturing processes and facilities are in compliance with FDA's requirements for product manufacturing and adequate to assure consistent production of the
product within required specifications by the manufacturer and all of its subcontractors and contract manufacturers. Additionally, before approving an NDA, the FDA will typically inspect one or more
clinical trial sites to assure compliance with cGCP. Also, as part of its regulatory review, the FDA verifies the data contained in the NDA.

The
testing and approval process for a drug product requires substantial time, effort and financial resources, and may take several years to complete. Data obtained from preclinical and
clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval of a marketing
application on a timely basis, or at all.

After
evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical
trial sites, the FDA may issue an approval letter, or, in some cases, a CRL. A CRL indicates that the review cycle of the application is complete, and the application is not ready for approval. A CRL
generally contains a statement of specific conditions that must be met in order to secure final approval of the drug product and may require additional clinical or preclinical testing, or other
information in order for the FDA to reconsider the application.

If
an application receives a CRL, the applicant may resubmit the application, addressing all of the FDA cited deficiencies, withdraw the application, or request the opportunity for a
hearing. If the applicant resubmits the application, the application is subject to an initial FDA review. Within 30 days of receipt, the FDA will review a resubmission to determine whether it
constitutes a complete response that addresses all deficiencies identified in a complete response letter. The agency then issues a letter to the applicant, stating whether the agency agrees that the
resubmission is a complete response. If the FDA does not agree that the resubmission is a complete response, the review clock will not start until a complete response is received. If the agency agrees
that the resubmission is a complete response, the FDA will classify the resubmission as either Class 1 or 2. FDA aims to review Class 1 resubmissions within two months of receipt or
Class 2 resubmissions within six months of receipt. Class 1 resubmissions are resubmissions of an NDA following a complete response letter, which include minor updates or data
reanalysis. Class 2 resubmissions include more complex or extensive updates to the NDA. As with the PDUFA timelines for original submissions, these are also subject to extension if the sponsor
submits new information. Resubmitted applications may also be subject to FDA inspection of

clinical
and manufacturing sites, as well as review by FDA Advisory Committees. Following its review of a resubmitted NDA, FDA may issue an approval letter or another CRL.

Even
if we resubmit with the required additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those
conditions have been met to the FDA's satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for
specific indications.

Even
if the FDA approves a product candidate, it may limit the approved indications for use of the product candidate and require that contraindications, warnings or precautions be
included in the product labeling, including a black box warning. The FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Moreover, the FDA may require that
post-approval studies, including Phase 4 clinical trials, be conducted to further assess certain aspects of a drug's safety and efficacy after approval, require testing and surveillance
programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a risk
evaluation and mitigation strategy, or REMS, as a condition of approval or following approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The REMS plan could
include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization
tools. A REMS could materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing studies
or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further
testing requirements, submission of a supplemental application, and FDA review and approval. Further, should new safety information arise, additional testing, product labeling or FDA notification may
be required.

Hatch-Waxman Act

Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing
authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A 505(b)(2) NDA is an application that contains full
reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for
which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on
the FDA's prior findings of safety and efficacy for an existing product, or published literature, in support of its application. Section 505(j) establishes an abbreviated approval process for a
generic version of approved drug products through the submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug product that has the same active
ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. ANDAs are termed
"abbreviated" because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applicants must scientifically
demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in
vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and
can often be substituted by pharmacists under prescriptions written for the reference listed drug. In seeking approval for a drug through an NDA, applicants are required to list with the FDA each
patent with claims that cover the applicant's drug or a method of using the drug. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA's
Approved Drug

Products
with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an ANDA
or 505(b)(2) NDA.

Upon
submission of an ANDA or a 505(b)(2) NDA, an applicant must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has
been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture,
use or sale of the drug product for which the application is submitted. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or
505(b)(2) NDA applicant challenges a listed patent through the last type of certification, also known as a paragraph IV certification. If the applicant does not challenge the listed patents or
indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have
expired.

If
the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must send notice of the Paragraph IV certification to the NDA and
patent holders within a specified timeframe. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the paragraph IV certification. If the
paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the paragraph IV certification, the FDA may not make an approval effective
until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was
favorably decided in the applicant's favor or settled, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where
an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay, recognizing that the related
patent litigation may take many months or years to resolve. Thus, approval of an ANDA or
505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

The
Hatch-Waxman Act establishes periods of regulatory exclusivity for certain approved drug products, during which the FDA cannot approve (or in some cases accept) an ANDA or 505(b)(2)
application that relies on the branded reference drug. For example, the holder of an NDA, including a 505(b)(2) NDA, may obtain five years of exclusivity upon approval of a new drug containing new
chemical entities, or NCEs, that have not been previously approved by the FDA. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active
moiety, which is the molecule or ion responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA or a 505(b)(2) NDA
submitted by another company that contains the previously approved active moiety. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a certification of patent
invalidity or non-infringement.

The
Hatch-Waxman Act also provides three years of marketing exclusivity to the holder of an NDA (including a 505(b)(2) NDA) for a particular condition of approval, or change to a
marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval
of the application and was conducted/sponsored by the applicant. This three-year exclusivity period protects against FDA making an ANDA and 505(b)(2) NDA approval effective for the condition of the
new drug's approval. As a general matter, the three-year exclusivity does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for generic versions of the original, unmodified drug product.
Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to
all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.

Our NDA for Twirla was submitted under Section 505(b)(2), and we expect that some of our other drug candidates will utilize the Section 505(b)(2)
regulatory pathway. Even though several of our drug products utilize active drug ingredients that are commercially marketed in the United States in other dosage forms, we need to establish safety and
efficacy of those active ingredients in the formulation and dosage forms that we are developing. All approved products, both innovator and generic, are listed in the FDA's Orange Book.

Combination Drug/Device Regulation

Our product candidates may be considered to be drug-device combination products by the FDA. While our product candidates, as a whole, are
subject to the NDA approval process, drug-device combination products require compliance with additional FDA regulations. For instance, drug-device combination products must comply with the drug
cGMPs, as well as some of the device Quality System Regulations, or QSRs. These dual requirements will require additional effort and
monetary expenditure to ensure that our product candidates comply with all applicable regulatory requirements.

U.S. Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among
other things, requirements relating to manufacturing recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion, reporting of adverse experiences with the product
and drug shortages, and compliance with any post-approval requirements imposed as a condition of approval, such as Phase 4 clinical trials, REMS and surveillance to assess safety and efficacy
after commercialization. After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There are also
continuing, annual prescription drug program user fee requirements for any approved products. In addition, drug manufacturers and other entities involved in the manufacture and distribution of
approved drugs are required to register their establishments with the FDA and state agencies, list drugs manufactured at their facilities with the FDA, and are subject to periodic announced and
unannounced inspections by the FDA and these state agencies for compliance with FDA and state requirements for product manufacturing and other requirements. Changes to the manufacturing process are
strictly regulated and often require prior FDA approval before being implemented, or FDA notification. FDA regulations also require investigation and correction of any deviations from FDA requirements
for product manufacturing and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must
continue to expend time, money and effort in the area of production and quality control to maintain FDA requirements for product manufacturing compliance.

Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches
the market.

Later
discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with
regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or
imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:



Restrictions on the marketing, distribution or manufacturing of the product, complete withdrawal of the product from the market or requests for
product recalls;

Mandated modification of promotional materials and labeling and the issuance of corrective information; or



The FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications
containing warnings or other safety information about the product.

The
FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Although physicians, in the practice of medicine, may prescribe
approved drugs for unapproved indications, pharmaceutical companies are prohibited from marketing or promoting their drug products for uses outside the approved label, a practice known as off-label
promotion. The FDA and other agencies enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be
subject to significant liability, including criminal and civil penalties under the FDCA and False Claims Act, exclusion from participation in federal healthcare programs, mandatory compliance programs
under corporate integrity agreements, debarment and refusal of government contracts.

In
addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of
drugs and drug samples at the federal level. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in
distribution.

Moreover,
the Drug Quality and Security Act imposes obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Among the requirements of this
legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, are required to label drug
product with a product identifier and are required to keep certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers is also required to be
done electronically. Manufacturers must also verify that purchasers of the manufacturers' products are appropriately licensed. Further, under this legislation, manufactures have drug product
investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products
that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death. Other persons
and entities within the drug supply chain are also subject to Drug Quality and Security Act requirements.

U.S. Fraud and Abuse, Data Privacy and Security and Transparency Laws and Regulations

In addition to FDA restrictions on marketing of pharmaceutical products, federal and state fraud and abuse laws restrict business practices in
the biopharmaceutical industry. These laws include, among

other
things, anti-kickback, physician payment transparency and false claims laws and regulations as well as data privacy and security laws and regulations.

The
federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly
or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any item or service
reimbursable under Medicare, Medicaid or other federal healthcare programs. The term "remuneration" has been interpreted broadly to include anything of value. Additionally, the intent standard under
the Anti-Kickback Statute and criminal healthcare fraud statutes was also amended by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute
or specific intent to violate it in order to have committed a violation. In addition, the ACA provided that the government may assert that a claim including items or services resulting from a
violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. The Anti-Kickback Statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors
protecting some common activities from prosecution. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be subject to
scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a statutory exception or regulatory safe harbor does not make the conduct per se illegal
under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

The
federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to,
or approval by, the federal government or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim
includes "any request or demand" for money or property presented to the U.S. government. The civil False Claims Act has been used to assert liability on the basis of kickbacks and other improper
referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price, improper
promotion of off-label uses not expressly approved by the FDA in a drug's label, and allegations as to misrepresentations with respect to the services rendered. Additionally, the civil monetary
penalties statute, which, among other things, imposes fines against any person who is determined to have presented, or caused to be presented, claims to a federal healthcare program that the person
knows, or should know, is for an item or service that was not provided as claimed or is false or fraudulent. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also
created federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses,
representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third party payors and knowingly and
willfully falsifying, concealing or covering up by trick, scheme or device a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or
payment for healthcare benefits, items or services relating to healthcare matters. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, that apply regardless of the payor.

In
addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes
specified requirements relating to the privacy, security and transmission of individually identifiable

health
information. Among other things, HITECH makes security standards and certain privacy standards directly applicable to business associates. HITECH also created four new tiers of civil monetary
penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or
injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition, state laws may govern the privacy and
security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Additionally,
federal physician payment transparency laws, including the federal Physician Payment Sunshine Act created under Section 6002 of the ACA and its implementing
regulations, require that manufacturers of drugs for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program, with certain exceptions, report annually to the
government information related to payments or other "transfers of value" made or distributed to physicians, which is defined to include doctors of medicine, dentists, optometrists, podiatrists and
chiropractors, generally, with some exceptions, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, physicians and teaching hospitals. Additionally,
applicable manufacturers and group purchasing organizations are required to report annually to the government certain ownership and investment interests held by physicians and their immediate family
members. Manufacturers must
submit reports by the 90th day of each calendar year. Disclosure of such information is made on a publicly available website.

There
are also an increasing number of analogous state laws that regulate price increases, require manufacturers to file reports with states on pricing and marketing information, and to
track and report gifts, compensation, other remuneration and items of value provided to healthcare professionals and healthcare entities. Many of these laws contain ambiguities as to what is required
in order to comply with such laws. For example, several states have enacted legislation requiring pharmaceutical companies to, among other things, establish and implement commercial compliance
programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, or register their sales representatives. Certain
state laws also regulate manufacturers' use of prescriber-identifiable data. These laws may affect our future sales, marketing and other promotional activities by imposing administrative and
compliance burdens. In addition, given the lack of clarity with respect to these laws and their implementation, our reporting actions once we commercialize could be subject to the penalty provisions
of the pertinent state and federal authorities.

If
our operations are found to be in violation of any of the laws or regulations described above or any other laws that apply to us, we may be subject to a variety of penalties,
depending upon the law found to have been violated, potentially including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in government
healthcare programs, corporate integrity agreements, refusal of government contracts, contract debarment and the curtailment or restructuring of our operations, any of which could adversely affect our
ability to operate our business and our results of operations. To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which
may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of
payments or transfers of value to healthcare professionals.

Coverage and Reimbursement Generally

The commercial success of Twirla and our other potential product candidates and our ability to commercialize any approved product candidates
successfully will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party
payors provide coverage for and establish adequate coverage of

and
reimbursement levels for our product candidates. Government authorities, private health insurers and other organizations generally decide which drugs they will pay for and establish reimbursement
levels for healthcare. In particular, in the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the
government provides reimbursement through the Medicare or Medicaid programs for such products and services. In the United States, the E.U. and other potentially significant markets for our product
candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and
therapies, which often has resulted in average selling prices lower than they would otherwise be. Further, the increased emphasis on managed healthcare in the United States and on country and regional
pricing and reimbursement controls in the E.U. will put additional pressure on product pricing, reimbursement and utilization, which may adversely affect our future product sales and results of
operations. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform,
pharmaceutical coverage and reimbursement policies and pricing in general. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely
on third-party payors to reimburse all or part of the associated healthcare costs. Sales of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to
which the costs of our products will be paid by health maintenance organizations, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health
administration authorities, such as Medicare and Medicaid, private health insurers and other third-party payors.

Third-party
payors are increasingly imposing additional requirements and restrictions on coverage and limiting reimbursement levels for medical products, including pharmaceuticals. For
example, federal and state governments reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions and limitations influence the purchase of
healthcare services and products. Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. Third-party payors may limit coverage to specific drug products
on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. Third-party payors are increasingly challenging the price and examining
the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to
demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our product candidates may not be considered medically necessary or
cost-effective. Moreover, a payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be
available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development for a product candidate. Legislative proposals to reform healthcare or
reduce costs under government insurance programs may result in lower reimbursement for our product candidates or exclusion of our product candidates from coverage. The cost containment measures that
healthcare payors and providers are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product candidates. We cannot provide any assurances
that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our product candidates in whole or in part.

Healthcare Reform

Legislative proposals to reform healthcare or reduce costs under government healthcare programs may result in lower reimbursement for our
product candidates or exclusion of our product candidates from coverage. There have been a number of legislative and regulatory changes to the healthcare system that could affect our ability to
profitably sell our product candidates, if approved. Among policy

makers
and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality
and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

In
March 2010, the ACA was enacted, which included provisions on comparative clinical effectiveness research extended the initiatives of the American Recovery and Reinvestment Act of
2009, also known as the stimulus package, which provided $1.1 billion in funding to study the comparative effectiveness of healthcare treatments. This funding was designated for, among other
things, conducting, supporting or synthesizing research that compares and evaluates the risks and benefits, clinical outcomes, effectiveness and appropriateness of products. The ACA also appropriated
additional funding to comparative clinical effectiveness research. Although Congress has indicated that this funding is intended to improve the quality of healthcare, it remains unclear how the
research will impact current Medicare coverage and reimbursement or how new information will influence other third-party payor policies.

It
is possible that comparative effectiveness research demonstrating benefits in a competitor's product could adversely affect the sales of our product candidates. If third-party payors
do not consider our product candidates to be cost-effective compared to other available therapies, they may not cover our product candidates, once approved, as a benefit under their plans or, if they
do, the level of payment may not be sufficient to allow us to sell our product candidates on a profitable basis.

In
addition, in August 2011, President Obama signed into law the Budget Control Act of 2011, as amended, which, among other things, created the Joint Select Committee on Deficit
Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction of at least $1.2 trillion for the
years 2013
through 2021, triggering the legislation's automatic reductions to several government programs. These reductions include aggregate reductions to Medicare payments to providers of 2% per fiscal year,
which went into effect on April 1, 2013 and will stay in effect through 2024 unless additional Congressional action is taken. In November 2015, the Bipartisan Budget Act was enacted into law,
which, among other things, extended sequestration through 2025. These and other healthcare reform initiatives may result in additional reductions in Medicare and other healthcare funding, which could
have a material adverse effect on our financial operations. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could further limit the prices we are able to charge, or the amounts of reimbursement available, for our product
candidates if they are approved.

On
January 20, 2017, the new administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant
exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers
of pharmaceuticals or medical devices among others. Additionally, in October 2017, the Department of Health and Human Services, jointly with the Department of Labor and the Treasury, issued two
interim rules outlining exemption processes for employers not wanting to offer contraceptive coverage based on their religious beliefs or sincerely held moral convictions. While there is an injunction
against the administration prohibiting it from implementing these rules, the ultimate outcome of that litigation cannot be predicted. Congress also could consider subsequent legislation to repeal and
replace elements of the ACA that are repealed. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our business.

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering
of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the
individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company
to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal
accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside the United States, can result in criminal and civil fines, imprisonment,
disgorgement, oversight and debarment from government contracts.

Foreign Regulation

We currently have no plans to seek approval for Twirla outside of the United States. In order to market any product outside of the United
States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials, marketing
authorization, commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory
authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country and can involve additional
product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval.
Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process
in others.

Research and Development

Conducting research and development is central to our business model. We have invested and expect to continue to invest significant time and
capital in our research and development operations. Our research and development expenses were $9.8 million, $14.4 million, and $20.9 million for the years ended
December 31, 2018, 2017, and 2016, respectively. In 2019, we expect our research and development expenses to remain relatively consistent with 2018 expenses. Research and development expenses
in 2019 will consist primarily of those costs associated with the continued development and refinement of our commercial manufacturing process, preparation and resubmission of the NDA for Twirla, and
responding to information requests expected to be received from the FDA as part of their review of our NDA resubmission. We have significantly scaled back equipment qualification and validation of our
commercial manufacturing process and resumption and completion of these activities will require additional capital.

Intellectual Property

We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent
protection intended to cover our Skinfusion® technology, its methods of use, related technologies and other inventions
that are important to our business. As more fully described below, our patents and patent applications are directed to our Skinfusion technology or aspects thereof including certain transdermal
delivery systems having an active adhesive matrix and methods of using such transdermal delivery systems for controlling fertility. We also rely on manufacturing trade secrets and careful monitoring
of our proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

Our
success will depend significantly on our ability to obtain new patents and maintain existing patents and other proprietary protection for commercially important technology,
inventions and know-how related to our business, defend and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing valid and enforceable patents and
other proprietary rights of third parties.

A
third party may hold intellectual property, including patent rights, which are important or necessary to the development of our product candidates. It may be necessary for us to use
the patented or proprietary technology of third parties to commercialize our product candidates, in which case we would be required to obtain a license from these third parties on commercially
reasonable terms. If we were not able to obtain a license on commercially reasonable terms, our business could be harmed, possibly materially.

We
plan to continue to expand our intellectual property estate by filing patent applications directed to novel and nonobvious transdermal contraceptive products. The active
pharmaceutical ingredients, or API, in our potential product candidates are generic and therefore our patents do not include claims directed solely to the API. We anticipate seeking additional patent
protection in the United States and internationally for additional transdermal delivery systems and their methods of use.

The
patent positions of pharmaceutical companies like us are generally uncertain and involve complex legal, scientific and factual questions. In addition, the coverage claimed in a
patent application can be significantly reduced before the patent is issued, and the patent's scope can be modified after issuance. Consequently, we do not know whether any of our product candidates
will remain protected by enforceable and valid patents. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the
claims of any issued patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third parties.

Because
patent applications in the United States and certain other jurisdictions generally are maintained in secrecy for 18 months, and since publication of discoveries in the
scientific or patent
literature often lags behind actual discoveries, we cannot be certain of our entitlement to patent rights in the inventions covered in our issued patents and pending patent applications. Moreover, we
may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office, USPTO, to determine priority of invention, or in post-grant challenge proceedings in the USPTO or
foreign patent offices such as oppositions, reexamination, inter-partes review, post grant review, or a derivation proceeding, that challenge our entitlement to an invention or the patentability of
one or more claims in our patent applications or issued patents. Such proceedings could result in substantial cost, even if the eventual outcome is favorable to us.

More
specifically, Twirla® is a transdermal contraceptive hormone delivery system. The system is a patch for application to the skin and contains two API, the hormones LNG,
which is a synthetic progestin, and EE, a synthetic estrogen. The API are formulated with a combination of skin penetration enhancers, which promote penetration through the dermis and into the
bloodstream, such that effective blood levels of the active agents are achieved to suppress ovulation and thereby prevent pregnancy. One of our other potential product candidates, AG890, is similar to
Twirla, except that it contains only a single API, LNG.

In
both our Twirla product candidate line and in AG890, the active adhesive system consists of the active ingredients in a polyacrylate adhesive polymer matrix comprising the permeation
enhancers dimethylsulfoxide, ethyl lactate, capric acid and lauryl lactate. The active blend is coated onto a release liner, and a backing layer is added on top of the active blend. The peripheral
adhesive system, also called the overlay, comprising three layers is added onto the backing layer. The overlay comprises a polyisobutylene adhesive layer, an acrylic adhesive layer, and an overlay
covering. The overlay covering is a commercially available silk-like polyester fabric. The adhesive components of the overlay, in

addition
to their adhesive function, create an in situ seal with the disposable release liner, trapping evaporable solvents in the active blend, thereby
extending the usable shelf life of the product candidate and contributing to the comfort and effectiveness of the transdermal system during use. Prior to use of any of our product candidates, the
release liner is removed by the user and discarded. The patch is then applied to the skin.

Eight
U.S. patents, issuing from two patent families, have been or are being submitted to the FDA for listing in the Orange Book upon approval of Twirla. These patents include claims
directed to transdermal delivery systems having an active adhesive matrix and claims directed to methods of controlling fertility by applying such transdermal delivery systems, and in all cases
including a skin permeation enhancer. One of our eight issued U.S. patents will expire November 22, 2020. Four will expire March 14, 2021. Two will expire July 10, 2028. The
eighth will expire August 26, 2028.

U.S.
Patent No. 7,045,145 is directed to the adhesive matrix of the transdermal delivery system used in Twirla and expires in March 2021; product-by-process claims cover patches
manufactured by drying wet formulations of the active adhesive matrix. U.S. Patent No. 7,384,650, U.S. Patent No. 8,221,784, and U.S. Patent No. 8,221,785 are all directed to the
dry final product formulation of the transdermal delivery system used in Twirla and expire in March 2021. U.S. Patent No. 8,221,784 covers both Twirla and AG890. Foreign counterparts to these
patents have been granted in Australia, China, India, Israel, and Mexico. U.S. Patent No. 8,883,196 is directed to a method of controlling fertility by applying Twirla or AG890 once each week
for three weeks followed by a one-week rest interval, or in an extended regimen without a rest interval for a selected number of weeks and expires November 22, 2020.

U.S.
Patent Nos. 8,246,978, 8,747,888, and 9,050,348 are directed to structural features of the transdermal delivery system used in Twirla and AG890 patch design for transdermal
delivery of hormones or of other drugs. As such, these patents protect a platform technology for delivery of LNG, EE, other hormones, and other drugs. These patents expire in July and August 2028.
Foreign counterparts have been granted in Australia, Canada, China, Spain, France, Netherlands, Italy, UK, Ireland, Germany, Switzerland, Japan, Russia and New Zealand and one counterpart remains
pending in India.

U.S.
Patent Nos. 9,198,876, 9,192,614, 9,198,919 and 9,198,920 and related patents and patent applications are directed to various novel dosing regimens, each of which employs
transdermal delivery of contraceptive doses of EE and LNG during a "treatment interval" and transdermal delivery of low dose EE and low dose LNG during a "withdrawal interval". Foreign counterparts
are pending or granted in Europe and Canada. We expect these patents will be relevant to two of the products in our pipeline, AG200-SP and AG200-ER, as well as other new potential regimens.

U.S.
Patent No. 9,364,487 is directed to a composition and device for transdermal delivery of LNG for P-only therapy. The composition contains an anti-oxidant to protect the
progestin against oxidative degradation caused by other components of the composition. Foreign counterparts are pending or granted in Canada, Europe, India, Japan and Mexico. We expect this patent to
be relevant to at least one product in our pipeline, AG890.

Regulatory Exclusivity

Our NDA for Twirla was submitted under Section 505(b)(2) of the FDCA. Even though Twirla utilizes API that were previously approved in
the United States, Twirla utilizes LNG in a new dosage form, specifically a transdermal patch, and we provided new clinical data essential to approval in our NDA to establish the safety and efficacy
of Twirla. Therefore, if approved by the FDA, we expect to receive three years of U.S. marketing exclusivity for Twirla. The exclusivity will prohibit the FDA from approving ANDAs and 505(b)(2) NDAs
for the conditions of the Twirla approval. We will consider whether we are going to pursue patent term restoration, however, we do not expect to
receive patent term restoration because, as explained above, Twirla will not be the first approval of the API.

As of December 31, 2018, we had 13 full time employees, including six in research and development and seven in general and administrative
roles. None of our employees are represented by a labor union or subject to a collective bargaining agreement. We have not experienced a work stoppage and consider our relations with our employees to
be good.

Corporate Information

We were incorporated in Delaware in December 1997. Our offices are located at 101 Poor Farm Road, Princeton, New Jersey 08540, and our telephone
number is (609) 683-1880.

Available Information

Our corporate website address is www.agiletherapeutics.com. Information contained on or accessible through our website are not a part of this
Annual Report on Form 10-K, and the inclusion of our website address in this annual report is an inactive textual reference only. We make our Annual Report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports available free of charge on our website as soon as reasonably practicable after we file such reports
with, or furnish such reports to, the Securities and Exchange Commission, or SEC.

We
are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until December 31, 2019. If on
June 28, 2019, the aggregate market value of our voting stock held by non-affiliates is less than $75 million, an auditor attestation report over Internal Controls over Financial
Reporting will not need to be included in the 2019 Form 10-K.

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth
below as well as the other information contained in this Annual Report on Form 10-K and in our other public filings in evaluating our business. Any of the following risks could materially and
adversely affect our business, financial condition or results of operations. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or
that we currently view to be immaterial may also materially adversely affect our business, financial condition or results of operations. In these circumstances, the market price of our common stock
would likely decline.

Risks Related to our Overall Business

We are significantly dependent on the success of our product candidate, Twirla, which requires regulatory
approval by the FDA. Our failure to resubmit the Twirla NDA and to receive regulatory approval of Twirla would have a material adverse effect on our business, the value of our common stock and would
likely require us to reduce or, even discontinue, operations.

We have invested significant efforts and financial resources in the development of Twirla, our lead product candidate, and substantially all of
our resources are currently dedicated to seeking regulatory approval for Twirla. Failure to receive approval or significant additional delay in obtaining a decision from the U.S. Food and Drug
Administration, or FDA, on whether to approve our resubmitted new drug application, or NDA, for Twirla would have a material adverse effect on our business and results of operations, including
possible termination of Twirla development and restructuring of our organization, which could include reducing, or even terminating, our operations.

None
of our product candidates has been approved for sale by any regulatory agency. The approval process in the U.S. is uncertain, can take many years and requires the expenditure of
substantial resources, and we are unable to predict the timing of when regulatory approval of Twirla may be received, if ever, in any jurisdiction. We have had a long and complicated history seeking
regulatory approval for Twirla in the U.S., which has included the submission of our NDA for Twirla twice (first in 2012 and again in 2017), the issuance of two complete response letters, or CRLs,
from the FDA in 2013 and 2017, and the need to pursue formal dispute resolution with the FDA after the 2017 CRL. We expect to face significant challenges as we continue to pursue regulatory approval
of Twirla, including the likely Advisory Committee review of the safety and efficacy of Twirla, where we expect a discussion regarding the Pearl Index, or PI, an efficacy measurement from our SECURE
Phase 3 clinical trial that the FDA noted is substantially higher than other previously approved combined hormonal contraceptives, or CHCs, and a likely pre-approval inspection of our
third-party manufacturer's facility, which must be successfully completed prior to approval.

In
addition, we will require additional funding to seek regulatory approval of Twirla and complete the commercial validation of the manufacturing process and commercial launch for
Twirla, if approved. Our planned timeline for seeking approval of Twirla and our ability to fund our operations through the period of time necessary potentially to receive approval of Twirla could be
adversely affected if we are unable to complete all of the work necessary to respond to the 2017 CRL, our NDA submission is significantly delayed, or we are unable to raise additional capital. If we
are unable to obtain sufficient additional funding or generate sufficient revenue and cash flows to continue our operations at planned levels, we may be forced to reduce, or even terminate, our
operations.

Even
if Twirla is approved, the labeling approved by the FDA may restrict how and to whom we and our potential partners, if any, may market the product or the manner in which our product
may be administered and sold, which could significantly limit the commercial opportunity for Twirla. See, Risks Related to Regulatory Approval for Our Product Candidates, Risks
Related to Our Financial Position and Need for Capital, and Risks Relating to the Commercialization of Our Product Candidates," for additional information.

Our independent registered public accounting firm has expressed substantial doubt about our ability to
continue as a going concern, which may hinder our ability to obtain future financing.

Our independent registered public accounting firm has issued a report that includes an explanatory paragraph referring to our recurring losses
from operations and expressing substantial doubt in our ability to continue as a going concern without additional capital becoming available. We believe that our cash and cash equivalents as of
December 31, 2018 along with the proceeds from our private placement completed in March 2019, will be sufficient to meet our projected operating requirements into the fourth quarter of 2019. We
have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. Pursuant to the receipt of the 2017 CRL, the formal dispute
resolution process with the FDA, the suggestion by the FDA that we conduct a comparative wear study with Twirla and Xulane, and the subsequent delay in the approval timeline for Twirla and as a result
of our financial condition and other factors described herein, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a
going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including strategic and refinancing
alternatives, asset sales and mergers and acquisitions. Our future success depends on our ability to raise additional capital and/or implement the various strategic alternatives discussed above. We
cannot be certain that these initiatives or raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to
us or, if available, will be on terms acceptable to us. If we issue additional securities to raise funds, these securities may have rights, preferences, or privileges
senior to those of our common stock, and our current shareholders may experience dilution. If we are unable to obtain funds when needed or on acceptable terms, we then may be unable to complete the
development of Twirla and may also be required to further cut operating costs, forego future development and other opportunities or even terminate our operations, which may involve seeking bankruptcy
protection.

Risks Related to the Regulatory Approval for Our Product Candidates

We have not obtained regulatory approval for any of our product candidates in the United States or any other
country, and such approval or approvals may never be granted or may be substantially delayed if regulatory authorities require additional time or studies to assess the safety and efficacy of our
product candidates.

We currently do not have any product candidates that have gained regulatory approval for sale in the United States or any other country, and we
cannot guarantee that we will ever have marketable products. Our business is substantially dependent on our ability to complete the development of, obtain regulatory approval for and successfully
commercialize product candidates in a timely manner. We cannot commercialize product candidates in the United States without first obtaining regulatory approval to market each product candidate from
the FDA; similarly, we cannot commercialize product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. We are not currently
pursuing any regulatory approvals for Twirla or any other potential product candidate outside the United States.

Before
obtaining regulatory approvals for the commercial sale of any product candidate for a target indication, we must demonstrate in, or rely on data from, preclinical studies and
well-controlled clinical trials and, with respect to approval in the United States, to the satisfaction of the FDA, that the product candidate is safe and effective for use for that target indication
and that the manufacturing facilities, processes and controls are adequate. In the United States, it is necessary to submit an NDA to obtain FDA approval. An NDA must include extensive preclinical and
clinical data and supporting information to establish the product candidate's safety and efficacy for each desired indication, although we may partially rely on published scientific literature or the
FDA's prior approval of similar products. The NDA must also include significant information regarding the chemistry, manufacturing and controls, or CMC, for the product. The FDA may further inspect
our manufacturing facilities to

ensure
that the facilities can manufacture our product candidates and our products, if and when approved, in compliance with the applicable regulatory requirements, as well as inspect our clinical
trial sites to ensure that our studies are properly conducted. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission, or
resubmission, of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions we
might make will be accepted for filing and review by the FDA, or ultimately be approved.

If
the application is not approved, the FDA may require that we conduct additional clinical or preclinical trials, reformulate the product, address issues with our manufacturing process
or facilities, or take other actions before it will reconsider our application. If the FDA requires additional studies or data, or if the FDA determines that our comparative wear study of Twirla and
Xulane does not support the conclusion of adequate Twirla adhesion and requires us to reformulate Twirla before resubmitting the Twirla NDA, or if the FDA, an FDA Advisory Committee or other
regulatory authority recommends non-approval or restrictions on approval, we may never receive marketing approval or we would incur delays in the marketing approval process and increased costs, which
may require us to expend more resources than we have available. Studies required to demonstrate the safety and efficacy of our product candidates are time consuming, expensive and together take
several years or more to complete, and approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate's clinical
development and may vary among jurisdictions and could lead to additional costs and delays. In addition, the FDA may not consider any additional information to be complete or sufficient to support
approval.

For
instance, we have had a long and complicated history seeking regulatory approval for Twirla in the U.S., which has included the submission of our NDA for Twirla twice (first in 2012
and again in 2017), the issuance of two complete response letters, or CRLs, from the FDA in 2013 and 2017, and the need to pursue formal dispute resolution with the FDA after the 2017 CRL. We expect
to face significant challenges as we continue to pursue regulatory approval of Twirla, including the likely Advisory Committee review of the safety and efficacy of Twirla, including an efficacy
measurement from our SECURE Phase 3 clinical trial that FDA noted is substantially higher than other previously approved combined hormonal contraceptives and a likely pre-approval inspection of
our third-party manufacturer's facility, which must be successfully completed prior to approval. For more information on our regulatory history for Twirla, see Part 1,
Item 1, "BusinessTwirla Clinical Development Program and Regulatory History."

Typically,
Advisory Committees will provide responses to specific questions asked by the FDA, including the committee's view on the approvability of the product candidate under review.
Advisory Committee decisions are not binding but an adverse decision at the Advisory Committee may have a negative impact on the regulatory review of Twirla. The Advisory Committee may recommend
non-approval for Twirla or may recommend approval with label restrictions. Even if the Advisory Committee determines that the benefits of Twirla outweigh its risks and recommends approval, the FDA
could still conclude that the Pearl Index is too high to demonstrate efficacy and an adequate risk/benefit profile for either the overall study population or a subgroup of the study population.
Accordingly, the FDA may not
approve our Twirla NDA. Alternatively, the FDA may determine that for a specific subgroup of patients, Twirla has lower efficacy and presents a higher risk, necessitating labeling restrictions,
statements or warnings. For instance, the FDA may require labeling restrictions, statements or warnings on the use of Twirla for patients in certain BMI categories. We also may not obtain approval of
Twirla based on these data or any other basis, or if approved, may only receive approval with significant labeling restrictions.

There
is no guarantee that the data obtained from the SECURE clinical trial, our comparative wear study, or any other clinical trial, or our changes to the manufacturing testing process
and specifications to address the 2017 CRL's findings will be supportive of, or guarantee, or result in our

successfully
obtaining timely FDA approval of Twirla for a commercially viable indication, if at all. We plan to resubmit our NDA for Twirla with the clinical data from the SECURE clinical trial, our
comparative wear study, and additional information and analyses responding to the 2017 CRL. When we do resubmit, the FDA could determine that the trial did not meet its objectives, or the FDA could
still have concerns about the conduct of the SECURE clinical trial, including regarding discontinuance of subjects from the trial, the rate of unscheduled bleeding, and subject delays in patch
application, which were factors mentioned in the 2017 CRL. While we designed the protocol for the SECURE clinical trial in consultation with the FDA after the 2013 CRL and completed analyses to
address the issues raised in the 2013 CRL, and are completing the analyses and other requested items from the 2017 CRL, there is no guarantee that the FDA will deem such steps to be sufficient to
address those issues when they are formally reviewed as a part of an NDA resubmission or to demonstrate safety and efficacy to the satisfaction of the FDA. The FDA may also find that our manufacturing
testing and specification changes do not address its CRL findings. Moreover, we cannot guarantee that we will resubmit our Twirla NDA for numerous reasons, including if we believe we are unable to
respond to the issues raised in the 2017 CRL.

In
addition to a review of the safety and efficacy of Twirla, the FDA must determine that Corium's manufacturing facilities meet certain FDA requirements for product manufacturing,
before granting product approval and before we can use them in the commercial manufacture of our products. We cannot assure you that Corium's responses to the objectionable conditions found during the
FDA's facility inspection will adequately address the issues communicated by the FDA in the 2017 CRL. We also expect that the FDA will re-inspect the Corium facilities during its review of our planned
resubmission before approval can be granted. The FDA may also determine that our responses to the deficiencies in the 2017 CRL and Corium's responses to the manufacturing facility inspection
objectionable conditions are not sufficient or require product development and additional analyses and/or studies and deny approval of the Twirla NDA on this basis as well. The FDA may also find
additional objectionable conditions upon re-inspection of the Corium facility. If the FDA does not approve the Corium facility for the manufacture of Twirla, or if Corium is not able to address the
objectionable conditions found by the FDA, the FDA could withhold approval or we may need to find an alternative supplier, which will take time and monetary expenditures, and which we may not be able
to do on favorable terms to us or at all.

We
plan on resubmitting our Twirla NDA in the second quarter of 2019. Consistent with our previous NDA resubmission in 2017, we currently expect that our resubmission of the NDA
responding to the 2017 CRL will be categorized as a Type 2 resubmission and receive a review period of six months from the date of resubmission of the NDA. Upon resubmission, there can be no
assurance that we will address the outstanding FDA questions in a manner sufficient for approval in the U.S.

In
addition to the factors discussed above, delays in regulatory approvals or rejections of applications for regulatory approval in the United States, or any other markets may result
from many other factors, including:



Lack of adequate funding to commence or continue our clinical trials due to unforeseen costs or other business decisions;

Regulatory questions regarding interpretations of data and results and the emergence of new information regarding our product candidates or
other products;



Regulators may not agree with our analyses, may interpret our data and study results differently than we do, or many not find our study results
supportive of approval;



Clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to
commence a clinical trial in countries that require such approvals;



Failure to reach agreement with the FDA or non-U.S. regulators regarding the scope or design of our clinical trials;

Any determination that a product candidate presents an unacceptable health risk or that the product candidate's risks are not sufficiently
outweighed by associated benefits;



Corium's inability to adequately resolve the objectionable conditions observed by the FDA when inspecting the facility or our inability to find
an alternative supplier;



We may be unable to obtain approval for the manufacturing processes or Corium's facilities with whom we contract for clinical and commercial
supplies;



FDA determines that our statistical analyses are not sufficient to support approval;



Failure of manufacturers to comply with FDA's or comparable regulatory authorities' requirements for the manufacture of products and product
candidates;



FDA or comparable regulatory authority determinations that our manufacturing processes, specifications, or tests are not sufficient or
acceptable;



FDA or comparable regulatory authority determinations that our clinical trials were not properly conducted or that such conduct did not comply
with regulatory requirements;



Our inability to obtain agreement from the FDA on product labeling; and



We may have insufficient funds to pay the significant user fees required by the FDA upon the filing of any future NDAs.

The FDA has disagreed with our interpretation of clinical results obtained from the SECURE clinical trial.
Our results from the SECURE clinical trial and our other studies do not guarantee support for regulatory approval of our NDA, and, even if the data from SECURE clinical trial or any other study are
deemed to be positive by the FDA, the FDA may disagree with other aspects of the SECURE clinical trial or our other studies and decline to approve Twirla for the proposed indication.

In connection with our planned resubmission of the Twirla NDA in response to the 2017 CRL, we cannot predict whether regulators will agree with
our conclusions regarding the results of the SECURE clinical trial or any clinical trials we have conducted to date, including our comparative wear study, or will conduct prior to resubmitting the
Twirla NDA, including whether our data are reliable and generalizable, demonstrate adequate adhesion properties and/or demonstrate adequate safety and efficacy sufficient for approval. Even if we
believe that the data from the SECURE clinical trial and our comparative wear study are positive, the FDA could determine that the data from the SECURE clinical trial or the comparative wear study
were negative or inconclusive or could reach a different conclusion than we did on that same data.

However,
ultimate approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific Pearl
Index. A fuller assessment of the clinical outcomes from the SECURE trial, and specifically the safety and efficacy of Twirla, will need to be conducted by the FDA and a likely Advisory Committee when
or if we resubmit our NDA for Twirla. For more information about the clinical development of Twirla and our SECURE Phase 3 clinical trial, please see Part 1,
Item 1, "BusinessOverview" and Item 1, "BusinessTwirla Clinical Development Program and Regulatory History."

Even
if the Advisory Committee determines that the benefits of Twirla outweigh its risks for either the full study population or a subgroup, and recommends approval, the FDA could still
decline to approve the product candidate. By example, the FDA may not agree with our analysis of the relationship between BMI and efficacy for Twirla and the FDA may interpret our overall data
differently than we do and may decline to approve Twirla on this or any other basis. FDA may conclude that the Pearl Index is too high to demonstrate efficacy and an adequate risk/benefit profile for
either the overall study population or a subgroup of the study population. FDA may, accordingly, not approve Twirla or may require labeling statements or warnings concerning use of Twirla in specific
subgroups, such as the non-obese study population. FDA may also decline to approve Twirla on any other basis.

Negative
or inconclusive results of a clinical trial or difference of opinion or negative Advisory Committee outcome could cause the FDA to decline to approve our application or require
us to repeat the trial or conduct additional clinical trials prior to obtaining approval for commercialization, and there is no guarantee that additional trials would achieve positive results to the
satisfaction of the FDA or that the FDA will agree with our interpretation of the results. Any such determination by the FDA would delay the timing of our commercialization plan for Twirla or prevent
its further development, or the further development of our other potential product candidates, and adversely affect our business operations. Additionally, the FDA has the authority to re-inspect
SECURE clinical trial sites as part of a review of an NDA, and the FDA may provide review commentary at any time during the resubmission and review process, either of which could delay the review
timeline, adversely affect the review process, or even prevent the approval of Twirla, any of which would adversely affect our business.

The
FDA has significant discretion in the review process, and we cannot predict whether the FDA will agree with our conclusions regarding the results of the SECURE clinical trial,
including whether our data are reliable and generalizable. For example, the FDA has in the past and in the future may disagree with our calculations relating to the number of pregnancies occurring on
study, or may view the SECURE clinical trial data, and other information and analyses as insufficient to demonstrate a favorable benefit/risk profile for approval for the proposed indication. Ultimate
approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific Pearl Index. However, upon any future NDA
resubmission, the FDA may find that the Twirla Pearl Index does not support a satisfactory benefit/risk profile to permit product approval.

At
any future point in time, the FDA could require us to complete further clinical or preclinical trials or take other actions which could delay or preclude approval of the NDA and would
require us to obtain significant additional funding. Changes to regulatory requirements, approval requirements, or guidance may also delay or preclude NDA approval. There is no guarantee such funding
would be available to us on favorable terms, if at all, nor is there any guarantee that FDA would consider any additional information complete or sufficient to support approval.

Our product candidates may have undesirable adverse effects, which may delay or prevent regulatory approval.

Unforeseen adverse effects from any of our product candidates could arise either during clinical development or, if approved, after the approved
product has been marketed. In the combined safety population of our Phase 3 trials completed prior to the SECURE clinical trial, there were a total of 22 serious adverse events, or SAEs, of
which 16 occurred in the Twirla cohort, which had approximately 2.3 times as many subjects as the oral contraceptive comparator cohort. Three of the 16 SAEs in the Twirla cohort (0.2% of the overall
Twirla safety population) were considered to be possibly related to Twirla, and included one drug overdose with Benadryl, one case of uncontrollable nausea and vomiting and one instance of DVT. In
addition to the SAEs described above, some subjects taking Twirla experienced non-serious adverse events, such as nausea, headache, application site irritation and breast tenderness. Subjects
receiving the oral contraceptive comparator also experienced non-serious adverse events such as nausea, headache and breast tenderness, though at different rates. In the SECURE clinical trial, SAEs
were observed in approximately 2.0% of the SECURE clinical trial population, and 0.6% of subjects had SAEs that were considered potentially study drug related, including DVT, PE, gallbladder disease,
ectopic pregnancy, and depression. In the combined safety database for the three Agile Phase 3 trials (n >3,000), there were 5 subjects with potentially study drug related DVTs or PEs, 4 of
whom were obese (BMI >30kg/m2).

Any
undesirable adverse effects that may be caused by our product candidates could interrupt, delay or halt clinical trials and could result in more restrictive labeling or the denial of
regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing our product candidates and generating revenues from
their sale. For instance, the FDA may determine that for specific subgroups of patients, Twirla has lower efficacy and presents a higher risk. Accordingly, the FDA may not approve our Twirla NDA or
may require labeling restrictions, statements or warnings. By example, the FDA may require labeling restrictions, statements or warnings on the use of Twirla for patients in certain BMI categories.
Adverse effects in any clinical trial could also impact subject recruitment or the ability or willingness of enrolled subjects to complete the trial or result in product liability claims. Any of these
occurrences may harm our business, financial condition and prospects significantly.

Our development and commercialization strategy for Twirla depends, in part, on published scientific
literature and the FDA's prior findings regarding the safety and efficacy of approved products containing Ethinyl Estradiol and Levonorgestrel based on data not developed by us, but upon which the FDA
may rely in reviewing our NDA.

The Hatch-Waxman Act added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA, Section 505(b)(2) permits the
filing of an NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a
right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving an NDA, to permit the
applicant to rely, in part, upon published literature or the FDA's previous findings of safety and efficacy for an approved product. The FDA also requires companies to perform additional clinical
trials or measurements to support any deviation from the previously approved product and to support the reliance on the applicable published literature or referenced product. The FDA may then approve
the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2)
applicant. The label, however, may require all or some of the limitations, contraindications, warnings or precautions included in the reference product's label, including a boxed warning, or may
require additional limitations, contraindications, warnings or precautions. We have submitted an NDA for Twirla under Section 505(b)(2) and as such the NDA relied, in part, on the FDA's
previous findings of safety and efficacy from investigations for approved products containing

ethinyl
estradiol, or EE, and levonorgestrel, or LNG, and published scientific literature for which we have not received a right of reference. We also plan to rely on the 505(b)(2) pathway for our
other product candidates. We received the 2013 CRL in response to our initial Section 505(b)(2) NDA for Twirla, as well as the 2017 CRL in response to our NDA resubmission. Even though we may
be able to take advantage of Section 505(b)(2) to support potential U.S. approval for Twirla, the FDA may require us to perform additional clinical trials or measurements to support approval
over and above the clinical trials that we have already completed. By example, in accordance with FDA's suggestion, we completed a wear study of Twirla's adhesion properties. In addition,
notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years some pharmaceutical companies and others have objected to the FDA's
interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section 505(b)(2), or if the FDA's interpretation is successfully challenged in court, this could delay or
even prevent the FDA from approving any Section 505(b)(2) NDAs that we submit. Such a result could require us to conduct additional testing and costly clinical trials, which could substantially
delay or prevent the approval and launch of our product candidates, including Twirla.

Our product candidates may be considered to be combination products by the FDA. If they are, the requirements
that we are required to comply with will be more complex.

Our product candidates may be considered by the FDA to be drug-device combination products. While our product candidates, as a whole, will be
subject to the drug approval process, we and any of our contractors will be required to comply with the FDA regulatory requirements related to both drugs and devices. For instance, drug-device
combination products must comply with both the drug cGMPs and device QSRs, which may be done using a streamlined approach. Additionally, drug-device combination products will be subject to additional
reporting requirements. The development of drug-device combination products will also be more complex because the sponsor of the product application we will need to demonstrate the combined safety and
efficacy of the drug and device components. These requirements will require additional effort and monetary expenditure to ensure that our product candidates are in compliance.

Risks Related to Our Financial Position and Need for Capital

We have incurred operating losses in each year since our inception and expect to continue to incur
substantial losses for the foreseeable future. Management has concluded that these factors raise substantial doubt about our ability to continue as a going concern.

We have incurred losses in each year since our inception in December 1997. Our net loss was $19.8 million, $28.3 million and
$28.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, we had an accumulated deficit of approximately $241.6 million. We
believe that our cash and cash equivalents as of December 31, 2018 along with the proceeds from our private placement completed in March 2019, will be sufficient to meet our operating
requirements into the fourth quarter of 2019 and will not be sufficient to fund our current and planned operations through the 12 months following the date on which this Annual Report on
Form 10-K is filed, which raises substantial doubt about our ability to continue as a going concern. Substantial doubt about our ability to continue as a going concern may create negative
reactions to the price of our common stock and we may have a more difficult time obtaining financing in the future.

Specialty
pharmaceutical product development is a speculative undertaking, involves a substantial degree of risk and is a capital-intensive business. We expect to incur expenses without
corresponding revenues until we are able to obtain regulatory approval and subsequently sell Twirla in significant
quantities, which may not happen. We have devoted most of our financial resources to research and development, including our non-clinical development activities and clinical trials. We expect we will
need to incur additional expenses as we complete the development of Twirla, respond to the 2017 CRL

and
seek regulatory approval of Twirla, complete the qualification and validation of our commercial manufacturing process, initiate pre-launch commercial activities, commercially launch Twirla,
advance our other potential product candidates and expand our research and development programs. Substantially all of our resources are currently dedicated to developing and seeking regulatory
approval for Twirla. We will require additional capital to fund our operating needs for the remainder of the fourth quarter of 2019 and beyond, including among other items, preparation for an
anticipated Advisory Committee meeting, the resumption and completion of our commercial plan for Twirla, which primarily includes validation of our commercial manufacturing process and the commercial
launch of Twirla, if approved, and advancing the development of our other potential product candidates. Our planned timeline for seeking approval of Twirla and our ability to fund our operations
through the period of time necessary to receive approval of Twirla, if at all, could be adversely affected based on our ability to complete the activities and gather the information necessary to
respond to the issues raised in the 2017 CRL and funding available to complete these activities. We may not be able to obtain sufficient additional funding to continue our operations at planned levels
and be forced to reduce, or even terminate, our operations. To date, we have financed our operations primarily through sales of common stock, convertible preferred stock and convertible promissory
notes and to a lesser extent, through term loans and government grants. Our product candidates will require the completion of regulatory review, significant marketing efforts and substantial
investment before they can provide us with any revenue.

Assuming
we obtain FDA approval, and assuming we obtain the additional funding we will require, we expect that our expenses will increase as we prepare for the commercial launch of
Twirla. As a result, we expect to continue to incur substantial losses for the foreseeable future, and these losses may increase. We are uncertain when or if we will be able to achieve or sustain
profitability. If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair our ability to sustain
operations and adversely affect the price of our common stock and our ability to raise additional capital. We are significantly dependent on the success of Twirla, and if we do not obtain FDA approval
of Twirla and/or are unable to obtain additional funding, we will need to reassess our operating capital needs and may be unable to continue our operations at planned levels and be forced to reduce,
or even terminate, our operations.

We have never been profitable. Currently, we have no products approved for commercial sale, no source of
revenue and we may never become profitable.

We have never been profitable and do not expect to be profitable in the foreseeable future. We have no products approved for commercial sale and
to date have not generated any revenue from product sales. Our ability to generate revenue and become profitable depends upon our ability to successfully complete the development of and obtain the
necessary regulatory approvals for our product candidates. We have been engaged in developing Twirla and our Skinfusion® technology since our inception. To date, we have not generated any
revenue from Twirla, and we may never be able to obtain regulatory approval for the marketing of Twirla. In the event that we are unable to obtain regulatory approval for the marketing of Twirla, we
may not be able to realize the carrying value of our commercial manufacturing equipment due to the specialized nature of the equipment and the possible lack of an alternative future use for such
commercial manufacturing equipment. Further, even if we are able to gain approval for and commercialize Twirla or any other potential product candidate, there can be no assurance that we will generate
significant revenues or ever achieve profitability. Our ability to generate product revenue depends on a number of factors, including our ability to:



Successfully complete development of, and receive regulatory approval for Twirla and our other potential product candidates;

Obtain additional capital for the commercial scale-up of Twirla manufacturing process and commercial launch of Twirla, if approved, as well as
advancing the development or our other potential product candidates;



Set an acceptable price for our products, if approved, and obtain adequate coverage and reimbursement from third party payors;

Successfully market and sell our products, if approved, in the United States and abroad.

In
addition, because of the numerous risks and uncertainties associated with product candidate development, we are unable to predict the timing or amount of increased expenses, or when,
or if, we will be able to achieve or maintain profitability. In addition, our expenses could increase beyond our current expectations and resources if the FDA does not agree that the results of the
comparative wear study of Twirla and Xulane support resubmission of our Twirla NDA, and we are required by the FDA or other regulatory authorities to reformulate Twirla, and/or to perform studies or
conduct additional work for any other reason to support regulatory approval in addition to those that we currently anticipate. Even if our product candidates are approved for commercial sale, we
anticipate incurring significant costs associated with the commercial launch of these products.

Our
ability to become and remain profitable depends on our ability to generate revenue. Even if we are able to generate revenues from the sale of our products, if approved, we may not
become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or obtain additional funding or are unable to sustain profitability on a continuing
basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Even if we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise additional capital, expand our
business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.

We will need to obtain additional financing to fund our operations and, if we are unable to obtain such
financing, we may be unable to complete the development and commercialization of our potential product candidates.

Our operations have consumed substantial amounts of cash since inception. From our inception to December 31, 2018, we have cumulative net
cash flows used by operating activities of $211.6 million. We will need to obtain large amounts of additional capital to fund our future operations, including completing the development and
commercialization of our product candidates. We will need to obtain additional financing to develop our other potential product candidates, for the approval of our product candidates if requested by
regulatory authorities, and to complete the development of any
additional product candidates we might acquire. Moreover, our fixed expenses such as rent, interest expense and other contractual commitments are substantial and are expected to increase in the
future.

Our
future funding requirements will depend on many factors, including, but not limited to:



Time and cost necessary to obtain regulatory approvals that may be required by regulatory authorities;

Amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for such potential
products and the availability of adequate third-party coverage and reimbursement;



Sales and marketing costs associated with commercializing our products, if approved, including the cost and timing of expanding our marketing
and sales capabilities;

Terms and timing of any potential future collaborations, licensing or other arrangements that we may establish;



Cash requirements of any future acquisitions or the development of other product candidates;



Costs of operating as a public company;



Time and cost necessary to respond to technological and market developments;



Costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and



Costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other arrangements that
we may establish.

Until
we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations,
strategic alliances and marketing or distribution arrangements. Additional funds may not be available when we need them on
terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or
our commercialization efforts. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that
time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

In
January 2018, following our receipt of the 2017 CRL, we significantly scaled back our preparations for commercialization of Twirla, including commercial pre-launch and manufacturing
validation activities, pending our ability to address the 2017 CRL and receive approval of Twirla. In June 2018, we announced a reduction in our workforce, which resulted in the termination of
approximately thirty percent of our employees. This workforce reduction, along with other reductions in our planned operating expenses, was designed to reduce operating expenses and preserve cash
while we pursued formal dispute resolution, which is now complete. As a result of these planned cost reductions, we believe that our cash and cash equivalents as of December 31, 2018, which
were $7.8 million, along with the proceeds from our private placement completed in March 2019 will be sufficient to meet our projected operating requirements into the fourth quarter of 2019. We
will require additional capital to fund operating needs for the remainder of the fourth quarter of 2019 and beyond, including among other items, the resumption and completion of our commercial plan
for Twirla, which primarily includes the validation of our commercial manufacturing process and the commercial launch of Twirla, if approved, and advancing the development of our other potential
product candidates. Accordingly, we will be required to obtain further funding through other public or private offerings, debt financing, collaboration or licensing arrangements or other sources.

Our
planned timeline for seeking approval of Twirla and our ability to fund our operations through the period of time necessary to receive approval of Twirla, if at all, could be
adversely affected based

on
our ability to complete the activities and gather the information necessary to respond to the issues raised in the 2017 CRL and funding available to complete these activities. We may not be able to
obtain sufficient additional funding to continue our operations at planned levels and be forced to reduce, or even terminate, our operations. Adequate additional funding may not be available to us on
acceptable terms, or at all. If we are unable to raise additional capital when needed or on attractive terms, or we are unable to enter into strategic collaborations, we then may be unable to complete
the development of Twirla and may also be required to further cut operating costs, delay, reduce or eliminate our research and development programs or future commercialization efforts or even
terminate our operations, which may involve seeking bankruptcy protection. Our forecast of the period of time through which our financial resources will be adequate to support our operating
requirements is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this
"Risk Factors" section. For instance, we cannot assure you that the FDA will approve Twirla, that the FDA's timeline for
review will be within six months, or that we will timely complete the qualification and validation of our commercial manufacturing process. We have based this estimate on a number of assumptions that
may prove to be wrong and changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. If we choose to accelerate elements of our commercial
plan or we encounter any unforeseen events that affect our business plan, we may choose to raise additional funds to provide us with additional working capital. Our inability to obtain additional
funding when we need it could seriously harm our business and we may be unable to continue our operations at planned levels and be forced to reduce, or even terminate, our operations.

We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. The
sale of additional equity or convertible debt securities could result in the issuance of additional shares of our capital stock and could result in dilution to our stockholders. The incurrence of
indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our
ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We cannot guarantee that future financing
will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented
from pursuing research and development efforts. This could harm our business, operating results and financial condition and cause the price of our common stock to fall.

Risks Relating to the Commercialization of Our Product Candidates

We are significantly dependent on the commercial success of Twirla.

Assuming FDA approval, Twirla will be the first product that we commercialize. The rest of our pipeline of products are in earlier stages of
clinical development and will require additional clinical and product development and funding in order to advance towards commercialization, which could take considerable time. If Twirla is not
approved, our business, results of operations and ability to advance our pipeline, would be significantly adversely affected. In addition, we will require additional capital for the validation of our
commercial manufacturing process and
commercial launch of Twirla, if approved. Our ability to generate revenues and become profitable will depend in large part on the commercial success of Twirla. Potential prescribers of Twirla include
physicians, nurse practitioners, or NPs, physician's assistants, or PAs, and pharmacists. Registered Pharmacists are authorized to prescribe contraceptives in some states, and other states have
pending legislation that would allow pharmacists to prescribe contraceptives. If Twirla or any other product that we commercialize in the future does not gain an adequate level of acceptance among
prescribers, patients and third parties, we may not

generate
significant product revenues or become profitable. Market acceptance of Twirla, and any other product that we commercialize, by prescribers, patients and third-party payors will depend on a
number of factors, some of which are beyond our control, including:



Efficacy, safety and other potential advantages of our product candidates in relation to alternative treatments;



Relative convenience and ease of administration of our product candidates;



Availability of adequate coverage or reimbursement of our product candidates by third parties, such as insurance companies and other payors,
and by government healthcare programs, including Medicare, Medicaid and state health insurance exchanges;

Cost of our product candidates in relation to alternative treatments, including generic products;



Extent and strength of our third-party manufacturer and supplier support and ability to meet our market demand;



Extent and strength of our marketing and distribution support;



Limitations or warnings contained in our product's FDA approved labeling, including safety warnings and precautions and limitations on the use
of Twirla for women based on BMI or weight; and



Distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary risk management plan.

For
example, if Twirla is approved by the FDA, prescribers and patients may not be immediately receptive to a transdermal contraceptive system, as opposed to a pill or any other method,
and may be slow to adopt it as an accepted treatment for the prevention of pregnancy. In addition, even though we believe Twirla has significant advantages over other treatment options, because no
head-to-head trials comparing the safety and efficacy of Twirla to the competing approved patch product have been conducted, the prescribing information approved by the FDA would not contain claims
that Twirla is safer or more effective than the currently approved patch product, or other claims that may be necessary for successful marketing of Twirla. The availability of numerous inexpensive
generic forms of contraceptive products may also limit acceptance of Twirla among prescribers, patients and third-party payors. If Twirla does not achieve an adequate level of acceptance among
prescribers, patients and third-party payors, we may not generate significant product revenues or become profitable.

It will be difficult for us to profitably sell Twirla, if approved, or any other product that we obtain
marketing approval for in the future if coverage and reimbursement for such product is limited.

Market acceptance and sales of Twirla, if approved, or any other product that we obtain marketing approval for in the future, will depend on
coverage and reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which medications they will pay for and establish reimbursement levels for approved medications. A primary trend in the U.S. healthcare industry is cost containment. Government
authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage or
reimbursement will be available for Twirla, if approved, or any other product that we obtain marketing approval for in the future and, if coverage is available, we cannot be sure of the level of
reimbursement. Reimbursement may impact the demand for, or the price of, Twirla, if approved, and any other products that we obtain marketing approval for and commercialize. Numerous generic products
may be available at lower prices than branded therapy products, such as Twirla, which may also reduce the likelihood and level of reimbursement for Twirla or other products. If coverage and
reimbursement are not available or are available only at limited levels, we may not be able to successfully commercialize Twirla, if approved, or any other product for which we obtain marketing
approval.

If we are unable to establish effective marketing and sales capabilities for Twirla, if approved, or enter
into agreements with third parties to market and sell Twirla, we may be unable to generate product revenues.

At present, we have no sales personnel and a limited number of marketing personnel. Initially, we do not plan to establish our own sales force,
but rather we intend to engage a contract sales organization. Depending on our available capital resources, we plan to hire a limited number of additional marketing personnel and engage a contract
sales organization in the United States shortly after the FDA approval of Twirla. At the time of our anticipated commercial launch of Twirla, assuming regulatory approval by the FDA, our sales and
marketing team will have worked together for only a limited period of time. If our regulatory review period by the FDA for our NDA resubmission is extended beyond six months, we may need to further
delay initiating certain commercial activities in order to preserve cash, in which case our ability to launch Twirla would be compromised. We cannot guarantee that we will be successful in marketing
Twirla in the United States.

We
may not be able to establish our own sales force or a contract sales force in a cost-effective manner or realize a positive return on this investment. In addition, we will have to
compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize Twirla, if
approved, in the United States without strategic partners or licensees include:

The inability of sales personnel to obtain access to or persuade adequate numbers of prescribers to prescribe Twirla;



The lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with
more extensive product lines;



The costs associated with training sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions;



Liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements; and



Unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales
organization.

If
we are not successful in recruiting sales and marketing personnel or in building a sales and marketing infrastructure, or if we do not successfully enter into appropriate
collaboration arrangements, we will have difficulty commercializing Twirla, which would adversely affect our business, operating results and financial condition.

If
we intend to commercialize Twirla outside the United States, we will likely enter into collaboration agreements with pharmaceutical partners, and we may have limited or no control
over the sales, marketing and distribution activities of these third parties. Our future revenues may depend on the success of the efforts of these third parties.

To
the extent that we rely on, or partner with, third parties to commercialize Twirla, if approved, or any other potential product candidate for which we obtain marketing approval in the
future, we may receive less revenue than if we commercialized these products ourselves. In addition, we would have less control over the sales efforts of any other third parties involved in our
commercialization efforts. We, however, will remain responsible for the conduct of any contract sales force, which could expose us to legal and regulatory enforcement actions and liability. In the
event that we are unable to partner

with
a third-party marketing and sales organization, our ability to generate product revenues may be limited in the United States, internationally or both.

Even if we receive regulatory approval for Twirla, we still may not be able to successfully commercialize it
and the revenue that we generate from its sales, if any, may be limited.

The commercial success of Twirla in any indication for which we obtain marketing approval from the FDA or other regulatory authorities will
depend upon the contraceptive market landscape as well as acceptance and uptake of Twirla by prescribers, patients and third-party payors.

Risks
related to the contraceptive market landscape include:



The prescription contraceptive market could experience a decrease in growth or negative growth if fewer women choose to use hormonal
contraception;



The perceived safety of hormonal contraceptives could be negatively affected by media reports of adverse effects and advertisements for mass
tort lawsuits due to adverse effects;



Price pressures from third party payors, including managed care organizations and government-sponsored health systems, could limit our revenue;



The proportion of the contraceptive market comprised of generic products continues to increase, making introduction of a branded contraceptive
difficult and expensive;



Competition in the contraceptive market could increase, with the introduction of new contraceptives, including the potential of a new generic
or branded competitive contraceptive patch;

Healthcare reform activities, including, without limitation, the repeal, reform or replacement of the Patient Protection and Affordable Care
Act, as amended by the Healthcare and Education Reconciliation Act of 2010 or, collectively, the Affordable Care Act, or ACA, and its effect on pharmaceutical coverage, reimbursement and pricing could
limit our revenue;



Access to the prescriber universe, particularly obstetrics and gynecology physicians, could be limited, decreasing our ability to promote
Twirla efficiently; and



Our ability to access pharmacists in states where they are authorized by law to prescribe contraceptives could be limited, decreasing our
ability to promote Twirla.

The
degree of acceptance and uptake of Twirla, if approved, by prescribers, patients and third-party payors will depend upon a number of factors,
including:



The level of contraceptive effectiveness of Twirla demonstrated in our clinical trials;



The incidence and severity of adverse effects associated with Twirla;



Limitations on use or warnings contained in FDA-approved labeling, which could include, for example, restrictions, statements or warnings on
the use of Twirla for women based on BMI or weight;



Acceptability to patients of the appearance and feel of Twirla;



Willingness of patients to try a new contraceptive and to use a transdermal patch as their form of contraception;



Willingness of prescribers to prescribe a contraceptive patch in light of safety issues and restrictive labeling of the currently marketed
contraceptive patch;

The cost of Twirla to the patient, as compared to other contraceptive products and methods;



Our ability to obtain and maintain sufficient third-party coverage or reimbursement for Twirla from private health insurers, government
healthcare programs (including Medicare, Medicaid and 340B Clinics) and other third-party payors; and



The effectiveness of our or any future collaborators' sales and marketing strategies.

In
addition, even if we obtain regulatory approval, the timing of an approval may reduce our ability to commercialize Twirla successfully. For example, if the approval process takes too
long, we may miss market opportunities, give other companies the ability to develop competing products, and require us to raise additional capital, which could delay our commercial launch. Any
regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render Twirla not commercially viable. For example, regulatory authorities may
grant approval contingent on the performance of costly post-marketing clinical trials or other post-marketing commitments, including REMS, or may approve Twirla with a label that contains fewer, or
more limited, indications than requested, a more limited patient population that requested, warnings, precautions or contraindications, including boxed warnings, and the label may not include the
claims necessary or desirable for the
successful commercialization of Twirla. Any of the foregoing scenarios could materially harm the commercial prospects for Twirla.

Moreover,
we may face additional generic or other drug product competition sooner than we anticipate for Twirla or our other potential product candidates, which would potentially limit
their commercial success. We believe that we may be eligible for three years of FDA marketing exclusivity for Twirla and our other potential product candidates. The FDCA provides a period of three
years of marketing exclusivity for an NDA, Section 505(b)(2) NDA or supplement to an existing NDA for a drug product that contains a previously approved active moiety, if new clinical
investigations, other than bioavailability or bioequivalence studies, were conducted or sponsored by the applicant and are determined by the FDA to be essential to the approval of the application.
This three-year marketing exclusivity, however, does not protect drug products from all competition. For instance, it does not protect against the approval of a full NDA. It also would only protect
against the approval of a product that contains the same conditions of approval as our product candidates. We may not receive the three-year exclusivity for any of our product candidates, and, even if
we do, it may not adequately protect us from competition. Competition that our product candidates may face from generic or similar versions of our product candidates could materially and adversely
impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.

If
Twirla is approved, but does not achieve an adequate level of acceptance by prescribers, third-party payors and patients, we may not generate sufficient revenue and we may not be able
to achieve or sustain profitability. Our efforts to educate prescribers, patients and third-party payors on the benefits of Twirla may require significant resources and may never be successful. Even
if we are able to demonstrate and maintain a competitive advantage over our competitors and become profitable, if the market for hormonal contraceptives fails to achieve expected future growth or
decreases, we may not generate sufficient revenue or sustain profitability. Our ability to generate sufficient revenue from Twirla will also be dependent on our ability to support the commercial
demand for Twirla and we cannot assure you that we along with our manufacturing partner Corium will be able to complete validation of our commercial manufacturing successfully and in a timely manner,
and, ultimately, adequately meet the commercial demand for Twirla, if approved.

The proportion of the contraceptive market that is made up of generic products continues to increase, making
introduction of a branded contraceptive difficult and expensive.

The proportion of the U.S. market that is made up of generic products has been increasing over time. For example, in 2005, generic contraceptive
products held 47% of prescription
volume and 34% of sales and, by 2011, those values had risen to 68% and 44%, respectively. Recently, Congress and the FDA have taken steps to increase generic competition in the market. If this trend
continues, it may be more difficult to introduce Twirla, if approved, as a branded contraceptive, at a price that will maximize our revenue and profits. Also, there may be additional marketing costs
to introduce Twirla in order to overcome the trend towards generics and to gain access to reimbursement by payors. If we are unable to introduce Twirla at a price that is commensurate with that of
current branded contraceptive products, or we are unable to gain reimbursement from payors for Twirla, or if patients are unwilling to pay any price differential between Twirla and a generic
contraceptive, our revenues will be limited. For example, in light of the introduction of the generic version of the Ortho Evra product by Mylan Inc. in April 2014, and the subsequent
discontinuation of distribution of Ortho Evra in October 2014 by Janssen, in order to be competitive and gain market share, we may increase the rebates available to commercial payors or we may provide
incentives to consumers covered by non-governmental payors, such as coupons or rebates, in order to make up for the difference in the co-payment for Twirla and the generic patch product.

Prescribers, patients and payors may not adopt a new contraceptive patch due to concerns based upon the prior
experience with or perception of the currently marketed contraceptive patch.

The Ortho Evra® contraceptive patch, or Evra, was introduced in early 2002 and was the first FDA-approved contraceptive patch. The
following is a brief history of the Evra market experience:



Evra had rapid uptake in the contraceptive market, achieving a 10% share of the CHC market by September 2003. The initial approved labeling for
Evra indicated that it delivered a daily EE dose of 20 micrograms.



Following the approval of Evra, the manufacturer of Evra and the FDA began receiving reports of thrombotic and thromboembolic events.



A pharmacokinetic study was conducted in 2005 and later published in the Journal of Clinical Pharmacology comparing Evra to an oral
contraceptive, which demonstrated that Evra was delivering higher serum concentrations of EE compared to an oral contraceptive with an EE dose of 35 micrograms. A pharmacokinetic study evaluates how
the body handles a given drug over time; these studies are conducted by measuring the amount of time it takes for the drug to be absorbed, distributed and eliminated throughout the body.



Johnson & Johnson, the manufacturer of Evra, revised the Evra labeling in November 2005 to include information that EE exposure with
Evra is 60% higher than that of an oral contraceptive containing EE of 35 micrograms, based on area under the curve, a commonly-used metric for measuring EE exposure in contraceptives. This
information was ultimately included in a unique boxed warning and bolded warning in the Evra labeling.



The FDA held a Joint Meeting of the Advisory Committees for Reproductive Health Drugs and Drug Safety and Risk Management on December 9,
2011. The Committees concluded that users of Evra have an increased risk of venous thromboembolism, or VTE compared to users of second-generation contraceptives, such as those containing LNG. The
Committees, through a vote, concluded that the benefits of Evra outweighed the risks, but that the current package insert did not adequately reflect the risk/benefit profile.



A subsequent change to the labeling for Evra was implemented in August 2012.

The Evra market share declined rapidly following the labeling changes, from a peak share of 11% in 2005, to 4% by the end of 2006, to 1.4% by
the end of 2013.



In April 2014, the Evra label was revised to provide revised dosage form and strength information. However, this revision did not affect the
unique boxed warning and bolded warning in the Evra label.



The approval of a generic equivalent to Evra, Xulane was announced by Mylan Inc. in April 2014. Subsequently, in October 2014, Janssen
discontinued distribution of Evra and currently over 99% of patch prescriptions are filled with the generic.

We
have conducted pharmacokinetic studies of Twirla to demonstrate that it delivers a daily EE dose of approximately 30 micrograms, comparable to a low-dose oral contraceptive. However,
because none of our completed or planned clinical trials studied or expect to study Twirla in a head-to-head comparison with Evra, if Twirla is approved by the FDA, we will not be able to make direct
comparative claims regarding the safety and efficacy of Twirla as compared to Evra. While we expect Twirla, if approved, to have the same boxed warning currently required for all CHCs, we cannot
predict whether the FDA will require that we include information in the Twirla labeling or boxed warning regarding the additional risks associated with the Evra patch. Assuming approval, if we are not
able to convince prescribers, patients and payors that Twirla delivers a low daily dose of EE, this may limit uptake and usage of Twirla and our revenue will be limited.

We face competition from other biotechnology and pharmaceutical companies and our operating results will
suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive. We would have significant competition with contraceptive products
already in the marketplace, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Any new product that
competes with a previously approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability or safety to be commercially successful. In addition, new products
developed by others could emerge as competitors to Twirla, if approved. If we are not able to compete effectively against our current and future competitors, our business will not grow, and our
financial condition and operations will suffer.

Our
potential competitors include large, well-established pharmaceutical companies, and specialty pharmaceutical sales and marketing companies. These companies include
Merck & Co., Inc., or Merck, which markets Nuvaring®, TherapeuticsMD, which has licensed and will market Annovera®, a recently approved contraceptive ring,
Allergan, Inc., or Allergan, which markets several branded and generic contraceptives including Minastrin® 24, LoLoestrin®, and Taytulla®, Bayer AG, or
Bayer, which markets Beyaz®, Yaz®, Yasmin®, and Natazia®, and Mylan N.V., which markets Xulane®, a generic version of Ortho Evra.
Additionally, several generic manufacturers currently market and continue to introduce new generic contraceptives, including Sandoz International GmbH, Glenmark Pharmaceuticals Ltd.,
Lupin Pharmaceuticals, Inc., and Amneal Pharmaceuticals, Inc.

There
are other contraceptive product candidates in development that, if approved, would potentially compete with Twirla. Specifically, Bayer has a contraceptive patch approved in the
European Union, or
E.U. Bayer entered into a license and distribution agreement for the sale of this contraceptive patch in Europe with Gedeon Richter Ltd. Other companies that have new hormonal contraceptive
product candidates in various stages of development include Allergan (progestin-only vaginal ring for which they received a CRL from the FDA), The Population Council in collaboration with Antares
Pharma, Inc. (transdermal gel contraceptive in Phase 2) ), and Mithra Pharmaceuticals SA (combination oral contraceptive in Phase 3).

Sales of our products, if approved, may be adversely affected by the consolidation among wholesale drug
distributors and the growth of large retail drug store chains.

The network through which we will sell our products, if and when approved, has undergone significant consolidation marked by mergers and
acquisitions among wholesale distributors and the growth of large retail drugstore chains. As a result, a small number of large distributors control a significant share of the market. In 2012, three
companies generated about 85% of all revenues from drug distribution in the United States, and in 2010, four chain pharmacy companies owned about 30% of all retail pharmacy outlets. Consolidation of
drug wholesalers and retailers, as well as any increased pricing pressure that those entities face from their customers, including the U.S. government, may increase pricing pressure and place other
competitive pressures on drug manufacturers, including us.

Existing and future legislation may increase the difficulty and cost for us to obtain marketing approval of
and to commercialize Twirla and our other potential product candidates and may affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval for Twirla, restrict or regulate post-approval activities and affect our ability to profitably sell Twirla.

Legislative
and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether
additional legislative changes will be enacted, or whether the FDA's regulations, guidance or interpretations will change, or what the impact of such changes on the potential marketing approval of
Twirla, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA's approval process may significantly
delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In
March 2010, President Obama signed into law the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the healthcare industry and impose additional
healthcare policy reforms. The ACA, among other things, increased the Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program for both branded and generic drugs, extended the
rebate program to certain individuals enrolled in Medicaid managed care organizations, addressed new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are line extension products and expanded the 340B drug discount program (excluding orphan drugs) to other entities. Further, the ACA imposed a significant annual tax on
companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may require us to modify our business practices
with regard to healthcare practitioners.

Of
particular relevance to our business is the ACA requirement that all health plans, with limited exceptions, cover certain preventive services for women with no cost-sharing, which
means no deductible, no co-insurance and no co-payments by the patient. Contraceptive methods and counseling, including all FDA-approved contraceptive methods as prescribed, are included in the ACA
mandate, and this has come to be known as the "contraceptive mandate." Under the ACA, payors are only required to cover one favored product within each contraceptive "method" without imposing any
cost-sharing obligations on the patient. For example, the introduction of a generic contraceptive patch product with a price that will likely be lower than the price of Twirla makes it less clear that
Twirla would have a preferred position, such as coverage without a co-insurance payment, under the ACA contraceptive mandate. Other products within the same method may also be covered, but payors are
allowed to use reasonable medical management techniques, such as the application of cost-sharing

obligations.
An amendment was issued that provided an exemption to the contraceptive mandate for group health plans established or maintained by religious employers. However, the contraceptive mandate
has remained controversial, with several legal challenges filed around the country. In June 2014, the U.S. Supreme Court ruled that owners of certain private companies can object to the contraceptive
mandate on religious grounds and in November 2015, the Court agreed to hear arguments from non-profit organizations requesting similar treatment. In October 2017, the U.S. Department of Health and
Human Services announced it will seek to issue regulations that will allow all companies to qualify for the exemption from the contraceptive mandate on the basis of religious and moral grounds.
Although it is too early to determine the full effect of the contraceptive mandate and other provisions of the ACA on our business, the law appears likely to continue the pressure on pharmaceutical
pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Further, on January 20, 2017, the current administration signed an Executive
Order directing federal agencies with authorities and responsibilities under the ACA to
waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health
insurers, or manufacturers of pharmaceuticals or medical devices among others. There are several proposals to reform the federal healthcare laws being advocated and it is still unclear whether such
reform efforts will succeed and if so, which proposals will ultimately be successful. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our
business.

In
addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among
other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for
the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions of Medicare
payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will stay in effect through 2024 unless additional Congressional action is taken. On January 2,
2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging
centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We expect that additional
federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn
could significantly reduce the projected value of our product candidates and reduce our profitability.

Moreover,
the Drug Quality and Security Act imposes obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Among the requirements of this
legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, are required to label drug
product with a product identifier and are required to keep certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers is required to be done
electronically. Manufacturers must also verify that purchasers of the manufacturers' products are appropriately licensed. Further, under this legislation, manufactures have drug product investigation,
quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products that are the
subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

Our ability to successfully market Twirla and other potential product candidates, if approved, will depend in part on the level of coverage and
reimbursement that government authorities, private health insurers and other organizations provide for Twirla or our other potential product candidates and contraceptives in general. Countries in
which Twirla or our other potential product candidates are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of
pharmaceutical products obtain governmental approval of initial prices and any subsequent price increases. In certain countries, including the United States, government-funded and private medical care
plans can exert significant indirect pressure on prices. We may not be able to sell Twirla or our other potential product candidates profitably if adequate prices are not approved or coverage and
reimbursement are unavailable or limited in scope. Increasingly, third party payors attempt to contain healthcare costs in ways that are likely to impact our development of products
including:



Failing to approve or challenging the prices charged for healthcare products;



Introducing reimportation schemes from lower-priced jurisdictions;



Limiting both coverage and the amount of reimbursement for new therapeutic products;



Denying or limiting coverage for products that are approved by the regulatory agencies but are considered to be experimental or investigational
by third party payors; and



Refusing to provide coverage when an approved product is used for off-label indications.

Risks Related to Manufacturing and Our Reliance on Third Parties

We have no manufacturing capacity and anticipate continued reliance on Corium, our third-party manufacturer,
for the development and commercialization of our product candidates in accordance with manufacturing regulations.

Corium is a biopharmaceutical company that focuses on the development, manufacture, and commercialization of specialty transdermal products. In
addition to partnering with other companies to manufacture transdermal products, Corium also engages in the research and development of its own proprietary transdermal drug delivery products. We rely
on Corium, our third-party manufacturer, to produce clinical supplies of Twirla and our other potential product candidates, and we plan to continue relying on them for commercial supplies and samples
of our product candidates, if approved. We do not own or operate, and have no plans to establish, any manufacturing facilities for our product candidates. We lack the resources and the capabilities to
manufacture Twirla or any of our product candidates on a clinical or commercial scale.

As
a third-party manufacturer, Corium's business operations are completely beyond our control and we have no influence over whether Corium changes its management or its business
operations, or discontinues them entirely. For example, in 2018 Corium was acquired by Gurnet Holding Company, or GHC. Following completion of the transaction, Corium became a private company, wholly
owned by GHC. Corium has announced that it plans to continue its operations in Grand Rapids, Michigan, where Twirla is expected to be commercially manufactured, if approved, and where clinical Twirla
supply is manufactured. While we currently have no indication that the acquisition will impact the manufacture of Twirla, we cannot guarantee that the acquisition will not disrupt the manufacture of
Twirla, that contract manufacturing will remain part of Corium's business model, or that as a result of the acquisition, there will not be other unforeseen changes that could materially affect the
manufacture of Twirla.

Furthermore,
we do not control the manufacturing process of Twirla, and are completely dependent on Corium for compliance with the FDA's manufacturing regulatory requirements for
manufacture of Twirla, our other potential product candidates and our products, if and when approved. If Corium or other contract manufacturers that we may use cannot successfully manufacture material
that conforms to our specifications and the strict regulatory requirements of the FDA, they will not be able to secure or maintain regulatory approval for their manufacturing facilities. The
facilities used by Corium to manufacture our product candidates must be approved by the FDA pursuant to inspections that are conducted in connection with the FDA's review of our NDA for Twirla.

While
Corium has provided the FDA with responses to each of the observations made during the FDA's facility inspection in 2017, the sufficiency of these responses, as well as our
responses concerning the quality control adhesion test methods and specifications, will be evaluated by the FDA after we resubmit the NDA for Twirla. We expect that the FDA will re-inspect our
manufacturing partner's facilities during its review of our planned resubmission before approval can be granted. The FDA may determine that our responses to the manufacturing deficiencies in the 2017
CRL and Corium's responses to the past or future manufacturing facility inspection objectionable conditions are not sufficient or require product development and additional analyses and/or studies and
deny approval of the Twirla NDA on this basis as well. For example, the FDA could determine that we and Corium have not established comparability between the manufacturing process used in producing
the clinical supplies for our SECURE clinical trial and the manufacturing process Corium plans to use to produce commercial supplies of Twirla, if approved, or that we or Corium have not adequately
addressed the FDA's 2017 CRL and PAI comments and findings, which in turn could require us and Corium to perform additional work, incur significant costs and delay the timeline for the resubmission of
our NDA and/or approval of Twirla. The FDA may also find additional objectionable conditions upon re-inspection of the Corium facility. If the FDA does not approve the Corium facility for the
manufacture of Twirla, or if Corium is not able to address the objectionable conditions found by the FDA during past or future inspections, the FDA may deny approval of Twirla or we may need to find
an alternative supplier, which will take time and monetary expenditures, and which we may not be able to do on favorable terms to us or at all. For more information on Twirla's manufacturing and
regulatory history of Twirla, please see Part 1, Item 1, "BusinessTwirla Clinical Development Program and Regulatory
History," "BusinessManufacturing," and "BusinessStrategic
Agreements."

In
addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable
foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative
manufacturing facilities that would also require FDA approval, and which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if
approved. Moreover, if our contract manufacturer cannot successfully manufacture materials that conform to our specifications and the strict regulatory requirements of the FDA, we may be subject to
other regulatory enforcement action such as adverse inspectional findings, Warning Letters, Untitled Letters, recall requests, withdrawal of
product or investigational approvals, clinical holds or termination of clinical trials, refusals to approve pending applications, disgorgement, restitution, exclusion from federal healthcare programs,
product seizures and detention, consent decrees, corporate integrity agreements, criminal and civil penalties, including imprisonment, refusal to permit import or export of the product and injunction
against or restriction of manufacture or distribution. If our contract manufacturer experiences issues in its manufacturing process or is unable to produce clinical supplies in adequate quantity and
quality, our clinical trials could be delayed, or our ability to receive regulatory approval of our product candidates could be negatively affected. Additionally, if there are changes to the
manufacturing process for Twirla or to our formulation for Twirla that require a change in the manufacturing process, we could experience significant additional cost and our ability to receive
regulatory approval could be delayed.

The
machinery and process to produce the commercial supply of Twirla must be qualified and validated, which is time-consuming and expensive, and this machinery is located within one
manufacturing site and is customized to the particular manufacturing specifications of Twirla. If Corium is unable to qualify and validate this equipment and the processes in a timely manner and
successfully produce validation batches, our ability to launch and commercialize Twirla, if approved, will be compromised and we could require additional capital to complete the validation process. If
this customized equipment malfunctions at any time during the production process, the time it may take Corium to secure replacement parts, to undertake repairs and to revalidate the equipment and
process could limit our ability to meet the commercial demand for Twirla. Similar manufacturing conditions may also apply to our other product candidates. This may increase the risk that the
third-party manufacturer may not manufacture Twirla in accordance with the applicable regulatory requirements, that we may not have sufficient quantities of Twirla or our potential product candidates
or that we may not have such quantities at an acceptable cost, any of which could delay, prevent, or impair the commercialization of Twirla, if approved, and the development of our other potential
product candidates.

Although
we have manufacturing agreements with Corium for the clinical and commercial supply of Twirla, Corium and several of its suppliers of raw materials will be single source
providers to us for a significant period of time. In particular, Corium manufactures Twirla using EE and LNG and components that it purchases from third parties, most of which are single source
suppliers of the applicable material. We do not have any control over the process or timing of the acquisition of these raw materials by Corium. Although we generally do not begin a clinical trial
unless we believe we have a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof,
for an ongoing clinical trial due to the need to replace a third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our
product candidates.

Because
we outsource all of our manufacturing processes, there is no guarantee that there will be sufficient supplies to fulfill our requirements or that we may obtain such supplies on
acceptable terms. Although Corium intends to enter into agreements with critical manufacturers, component fabricators
and secondary service providers to secure commercial supply of Twirla, not all of such suppliers and service providers will be under contract. Any delays in obtaining adequate supplies of our product
candidates could limit our ability to meet clinical and commercial demand for Twirla, if approved.

In
addition, in the event Twirla is approved and achieves significant market share, Corium may not possess adequate manufacturing capabilities to meet market demand for Twirla. If it
becomes necessary to engage an additional third-party manufacturer to produce Twirla, we may need to license certain manufacturing know-how from Corium, or our commercial supply will be limited while
the new third-party manufacturer develops the necessary know-how to manufacture Twirla and while we obtain regulatory approval for the addition of a new manufacturer.

Reliance
on a third-party manufacturer subjects us to risks that would not affect us if we manufactured the product candidates ourselves,
including:



Reliance on the third party for regulatory compliance and quality assurance;



Reduced control over the manufacturing process for our product candidates;



The possible breach of the manufacturing agreements by the third party because of factors beyond our control;



The possibility of termination or nonrenewal of the agreements by the third party because of our breach of the manufacturing agreement or based
on their own business priorities; and

Our
product candidates may compete with other products and product candidates for access to manufacturing resources and facilities. There are a limited number of manufacturers that
operate in compliance with the FDA's manufacturing requirements and that are both capable of manufacturing for us and willing to do so. If our existing third-party manufacturer, or the third parties
that we may engage in the future to manufacture a product for commercial sale or for our clinical trials, should cease to continue to manufacture our product candidates for any reason, we likely would
experience delays in obtaining sufficient quantities of our product candidates for us to meet commercial demand or to advance our clinical trials while we identify and qualify alternative suppliers.
If for any reason we are unable to obtain adequate supplies of our product candidates or the components used to manufacture them, it will be more difficult for us to develop our product candidates and
compete effectively.

Our
third-party manufacturer is subject to regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates, and subject to
ongoing inspections by the regulatory agencies. In addition to the above-described regulatory actions, failures by our third-party manufacturer to comply with applicable regulations may result in long
delays and interruptions to our manufacturing capacity while we seek to secure another third-party manufacturer that meets all regulatory requirements.

We are dependent on numerous third parties in Corium's supply chain for the supply of our product candidates,
and if Corium fails to maintain supply relationships with these third parties, develop new relationships with other third parties or suffers disruptions in supply, we may be unable to continue to
develop our product candidates, or, assuming FDA approval, commercialize Twirla.

We, through our manufacturing partner Corium, rely on a number of third parties for the supply of active ingredients, other raw materials and
laboratory services for the supply of our product candidates and, assuming FDA approval, commercialization of Twirla. Our ability to develop our product candidates depends, in part, on Corium's
ability to successfully obtain the components used to manufacture our product candidates, in accordance with regulatory requirements and in sufficient quantities for clinical testing and later
commercialization. If Corium fails to develop and maintain supply relationships with these third parties, we may be unable to continue to develop our product candidates or commercialize any approved
products in the future. Moreover, these third parties will be subject to FDA inspection. If these third parties do not comply with the FDA's regulatory requirements, we may not be able to receive or
maintain approval for Twirla or any of our other product candidates, and we may be subject to other regulatory enforcement action such as adverse inspectional findings, Warning Letters, Untitled
Letters, recall requests, withdrawal of investigational approvals, clinical holds, or termination of clinical trials, refusals to approve pending applications, disgorgement, restitution, exclusion
from federal healthcare programs, product seizures and detention, consent decrees, corporate
integrity agreements, criminal and civil penalties, including imprisonment, refusal to permit import or export of the product and injunction against or restriction of manufacture or distribution.

We,
through Corium, also rely on certain third parties as the current sole source of the materials they supply. Although many of these materials are produced in more than one location or
are available from another supplier, if any of these materials becomes unavailable to us for any reason, we likely would incur added costs and delays in identifying or qualifying replacement materials
and there can be no assurance that replacements would be available to us on acceptable terms, or at all. In certain cases, we may be required to get regulatory approval to use alternative suppliers,
and this process of approval could delay development of our product candidates and, assuming FDA approval, commercial production of Twirla, indefinitely. For example, the sole manufacturer of one of
the components of the packaging of our Twirla patch notified us that it would be discontinuing manufacture of the component. We currently believe that manufacturing of this component has now been
discontinued. In conjunction with Corium, we were able to secure an amount of inventory of the packaging component that we

believe
will last until at least 2021. We are currently evaluating sources for a replacement for this discontinued component and, assuming FDA approval of this replacement material, we could
eventually use the replacement material in connection with the commercial production of Twirla.

If
Corium's third-party suppliers fail to deliver the required quantities of sub-components and starting materials, in accordance with all regulatory requirements, and on a timely basis
and at commercially reasonable prices, and we and Corium are unable to find one or more alternative suppliers capable of production at a substantially equivalent cost in substantially equivalent
volumes and quality, and on a timely basis, the continued development of our product candidates, and assuming FDA approval, commercialization of Twirla, would be impeded, delayed, limited or
prevented, which could harm our business, results of operations, financial condition and prospects. We could also face regulatory enforcement actions.

If the manufacturing facilities of Corium are not maintained in a manner that is compliant with FDA's
manufacturing requirements, we may need to find alternative manufacturers and suppliers, which could result in supply interruptions of Twirla and our other potential product candidates, additional
costs and lost revenues.

Corium's facilities used for the manufacture of our product candidates must be maintained in a manner compliant with the FDA's manufacturing
requirements, including obtaining favorable inspection reports. We do not control the manufacturing process and are dependent on
Corium for compliance with the FDA's requirements for manufacture of Twirla and our other potential product candidates. If Corium cannot successfully manufacture material components and finished
products that conform to our specifications and the FDA's strict regulatory requirements, they and we may be subject to regulatory action, including adverse inspectional findings, Warning Letters,
Untitled Letters, product recall requests, withdrawal of product or investigational approvals, non-approval of marketing applications, clinical holds or termination of clinical trials, disgorgement,
restitution, exclusion from federal healthcare programs, detentions or seizures, refusal to allow the import or export of a product, injunction against or restriction of manufacture or distribution,
consent decrees, corporate integrity agreements, criminal and civil penalties, including imprisonment, and Corium may not be able to maintain FDA approval for its manufacturing facilities or
acceptance of its manufacturing data in regulatory filings. If Corium's facilities cannot maintain compliance with FDA requirements, we may need to find and successfully qualify alternative
manufacturing facilities, which could result in supply interruptions of Twirla and our other potential product candidates and substantial additional costs as a result of such delays, including costs
with respect to finding alternative manufacturing facilities, and lost revenues. There is further no guarantee that the FDA would approve these alternative facilities.

We rely on third parties to conduct aspects of our clinical trials. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines or comply with applicable regulatory requirements, we may be delayed in obtaining or ultimately not be able to obtain marketing
approval for our product candidates.

We currently rely and plan to continue to rely on CROs and clinical trial sites for most aspects of our clinical trials, such as trial conduct,
data management, statistical analysis and electronic compilation of our NDA. We may enter into agreements with additional CROs and clinical trial sites to obtain additional resources and expertise in
an attempt to accelerate our progress with regard to new or ongoing clinical and preclinical programs. Entering into relationships with CROs and clinical trial sites involves substantial cost and
requires extensive management time and focus. In addition, typically there is a transition period between engagement of a CRO and clinical trial sites and the time the CRO and sites commences work. As
a result, delays may occur, which may materially impact our ability to meet our desired clinical development timelines and ultimately have a material adverse impact on our operating results, financial
condition or future prospects.

As
CROs and clinical investigators are not our employees, we cannot control whether or not they devote sufficient time and resources to our clinical trials for which they are engaged to
perform, and whether they comply with the applicable regulatory requirements, known as Current Good Clinical Practices, or cGCPs, which are regulations and guidelines enforced by the FDA, the
Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our product candidates in clinical development, which include
requirements related to the conduct of the study, subject informed consent, and IRB approval.
Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and trial sites. Although we may rely on third parties for the execution of our
trials, we are nevertheless responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on
CROs and clinical trial sites does not relieve us of our regulatory responsibilities. If we, any of our CROs, or clinical trial sites fail to comply with applicable cGCPs, the clinical data generated
in our clinical trials may be deemed unreliable and the FDA, European Medicines Agency or comparable foreign regulatory authorities may require us to perform additional clinical trials before
approving our marketing applications, in addition to the SECURE clinical trial and wear study. We cannot assure you that, upon inspection by a given regulatory authority, such regulatory authority
will determine that any of our clinical trials complies with cGCP regulations. In addition, our clinical trials must be conducted with product candidate materials produced in compliance with the FDA's
manufacturing regulations. Our failure to comply with these regulations may require us to discontinue or repeat clinical trials, which would delay the regulatory approval process. If the CROs or
clinical trial sites we engage do not successfully carry out their contractual duties or obligations, conduct the clinical trials in accordance with all regulatory requirements and the applicable
protocols, or meet expected deadlines, or if they need to be replaced, or the quality or accuracy of the data they provide is compromised due to the failure to adhere to regulatory requirements or for
other reasons, then our development programs may be extended, delayed or terminated, or we may not be able to obtain marketing approval for or successfully commercialize our product candidates.
Failure to comply with clinical trial regulatory requirements may further subject us to regulatory action, including Warning Letters, Untitled Letters, adverse inspectional findings, clinical holds or
termination of clinical trials, non-approval of marketing applications, criminal and civil penalties, including imprisonment, injunction against manufacture or distribution and debarment. As a result,
our financial results and the commercial prospects for our product candidates would be harmed and our costs would increase.

Any collaboration arrangements that we may enter into in the future may not be successful, which could
adversely affect our ability to develop and commercialize our product candidates.

We may seek partnerships, collaborations and other strategic transactions to maximize the commercial potential of Twirla, our other potential
product candidates and our proprietary technologies in the United States and territories throughout the world. We may enter into such arrangements on a selective basis depending on the merits of
retaining commercialization rights for ourselves as compared to entering into selective collaboration arrangements with leading pharmaceutical or biotechnology companies for Twirla and each of our
other product candidates and technologies, both in the United States and internationally. We face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex,
and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we choose to enter
into such arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.

Any
future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to
these collaborations. Collaborators, also, may not comply with the applicable regulatory requirements, which may subject them or us to enforcement actions.

Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters could lead to delays in the development
process or commercialization of our product candidates and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has
final decision-making authority.

Collaborations
with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration
could adversely affect us financially and could harm our business reputation.

If we fail to establish an effective distribution process our business may be adversely affected.

We do not currently have the infrastructure necessary for distributing pharmaceutical products. We intend to contract with a third-party
logistics wholesaler to warehouse
these products and distribute them to pharmacies. This distribution network will require significant coordination with our sales and marketing and finance organizations. Failure to secure contracts
with wholesalers could negatively impact the distribution of our products, if and when approved, and failure to coordinate financial systems could negatively impact our ability to accurately report
product revenue. If we are unable to effectively establish and manage the distribution process, the commercial launch and sales of our products, if and when approved, will be delayed or severely
compromised and our results of operations may be harmed. Distribution practices will also need to comply with the applicable regulatory requirements. If our distributors do not comply with the
applicable regulatory requirements, we could be exposed to potential enforcement actions.

Risks Related to Regulatory Matters Following Approval

Even if we obtain marketing approval for Twirla or other potential product candidates, we will be subject to
ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, Twirla or other potential product candidates could be subject to labeling and
other restrictions, including withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems.

Even if we obtain U.S. regulatory approval of Twirla or other potential product candidates, the FDA may still impose significant restrictions on
their indicated uses, including more limited patient populations, require that precautions, contraindications, or warnings be included on the product labeling, including boxed warnings, or impose
ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. Claims that
we may make may also be restricted through our approved labeling. For instance, the FDA may require labeling restrictions, statements or warnings on the use of Twirla for patients in certain BMI
categories, which could limit the commercial potential of the product, if approved. The FDA may further require us to include other information and/or data in the label for Twirla that may make it
more difficult for us to successfully commercialize the product, if approved. For instance, the FDA may require us to include the Pearl Index results from the previously conducted Phase 3
trials, which were higher than the SECURE clinical trial's overall and certain sub-group Pearl Index results. We will discuss specific labeling requirements with the FDA in the future.

If
approved, Twirla and our other potential product candidates, if approved, will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging,
storage, distribution, import, export, safety surveillance, advertising, marketing promotion, recordkeeping, reporting of adverse events and other post-market information, and further development.
These requirements include registration with the FDA, listing of our drug products, payment of annual fees, as well as
continued compliance with cGCPs for any clinical trials that we conduct post-approval. Application holders must notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for

product
manufacturing changes. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for
compliance with the FDA's manufacturing requirements relating to quality control, quality assurance and corresponding maintenance of records and documents. If we are found to be noncompliant with
applicable requirements, the FDA and other government authorities may issue a Warning Letter or Untitled Letter, or take other regulatory action such as a product seizure and detention, withdrawal of
product approval, request for a recall, refusal to allow the import or export of the product, criminal or civil penalties, injunction against or restriction of manufacture or distribution, consent
decrees, disgorgement, restitution, clinical holds or terminations of clinical trials, exclusion from federal healthcare programs, corporate integrity agreements, or imprisonment.

The
FDA has the authority to require a REMS as part of an NDA or after approval, which may impose further requirements or restrictions on the information that patients must be provided,
distribution or use of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain
safe-use criteria or requiring treated patients to enroll in a registry.

With
respect to sales and marketing activities by us or any future collaborative partner, advertising and promotional materials must comply with the FDA's rules in addition to other
applicable federal and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the
requirements of the U.S. Prescription Drug Marketing Act. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without
limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws, which impact, among other things, our proposed sales, marketing and scientific/educational grant programs. If
we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws
and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar
requirements exist in many of these areas in other countries.

In
addition, if Twirla and our other potential product candidates are approved, our product labeling, advertising and promotional materials would be subject to regulatory requirements
and continuing review by the FDA, Department of Justice, Department of Health and Human Services' Office of Inspector General, state attorneys general, members of Congress and the public. The FDA
strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the
product's
approved labeling, a practice known as off-label promotion. If we receive marketing approval for Twirla or our other potential product candidates, physicians may nevertheless prescribe the products to
their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The
FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to
significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label
promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. For example, we believe that
Twirla, if approved, will have labeling consistent with other marketed hormonal contraceptive products, which include class labeling that warns of risks of certain serious conditions, including venous
and arterial blood clots, such as heart attacks, thromboembolism and stroke, as well as liver tumors, gallbladder disease, and hypertension, and a boxed warning regarding risks of smoking and CHC use,
particularly in women over 35 years old that smoke. However, regulatory authorities may require the inclusion of

additional
statements about adverse events in the label, including additional boxed warnings or contraindications, as well as additional labeled statements or warnings, such as restrictions,
statements or warnings on the use of Twirla for women based on BMI or weight.

In
the United States, engaging in the impermissible promotion of our products, following approval, for off-label uses can also subject us to false claims litigation under federal and
state statutes, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute drug products
through, for example, corporate integrity agreements, and debarment, suspension or exclusion from participation in federal and state healthcare programs. These false claims statutes include the
federal civil False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims or
causing others to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government decides to intervene and prevails in the lawsuit, the
individual will share in the proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. Since 2004, these False Claims Act lawsuits
against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements regarding certain sales practices promoting off-label
drug uses involving fines that are as much as $3.0 billion. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay
settlement fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid and other
federal and state healthcare programs. If we do not lawfully promote our approved products, if any, we may become subject to such litigation and, if we do not successfully defend against such actions,
those actions may have a material adverse effect on our business, financial condition, results of operations and prospects.

If
we or a regulatory agency discover previously unknown problems with a product candidate, once approved, such as adverse events of unanticipated severity or frequency, data integrity
issues with regulatory filings, problems with the facility where the product is manufactured or we or our manufacturers or others working on our behalf fail to comply with applicable regulatory
requirements before or after marketing approval, we may be subject to reporting obligations as well as the following administrative or judicial sanctions:



Restrictions on the marketing, distribution or manufacturing of the product, withdrawal of the product from the market, or requests for product
recalls;



Issuance of Warning Letters, Cyber Letters or Untitled Letters;



Mandated modification to promotional materials and labeling or require us to provide corrective information to healthcare providers;



FDA or regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing
warnings and other safety information about the product;



Require us to enter into a consent decree or corporate integrity agreement, which can include imposition of various fines, reimbursement for
inspection costs, required due dates for specific actions and penalties for noncompliance;



Clinical holds or termination of clinical trials;



Injunctions or the imposition of civil or criminal penalties, imprisonment, monetary fines disgorgement or restitution;

Refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license
approvals;



Debarment;



Exclusion from participation in federal healthcare programs or refusal of government contracts;



Suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or



Product seizure or detention or refusal to permit the import or export of product.

The
occurrence of any event or penalty described above may inhibit our ability to commercialize Twirla or our other potential product candidates, if approved, and generate revenue.
Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Moreover,
the FDA's policies may change, and additional government regulations may be enacted that could prevent, limit or delay marketing approval, and the sale and promotion of our
product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we
may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

Even if Twirla receives marketing approval by the FDA in the United States, we may never seek or receive
marketing approval for or commercialize Twirla or any other potential product candidates outside the United States.

In order to market Twirla or any other potential product candidate outside the United States, we must obtain separate marketing approvals and
comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and
distribution of our product candidates. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. The marketing approval
process in other countries may include all of the risks associated with obtaining FDA approval in the United States, as well as other risks. For example, legislation analogous to
Section 505(b)(2) of the FDCA in the United States, which relates to the ability of an NDA applicant to use published data not developed by such applicant, may not exist in other countries. In
territories where data is not freely available, we may not have the ability to commercialize our products, when and if approved, without negotiating rights from third parties to refer to their
clinical data in our regulatory applications, which could require the expenditure of significant additional funds. Further, we may be unable to obtain rights to the necessary clinical data and may be
required to develop our own proprietary safety and efficacy dossiers. In addition, in many countries outside the United States, it is required that a product receive pricing and reimbursement approval
before the product can be commercialized. This can result in substantial delays in such countries. Further, the product labeling requirements outside the United States may be different and
inconsistent with the U.S. labeling and to the detriment to the product, and therefore negatively affect the ability to market in countries outside the United States.

Marketing
approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the
regulatory process in others. In addition, we may be subject to fines, suspension or withdrawal of marketing approvals, product recalls, seizure of products, operating restrictions and criminal
prosecution if we fail to comply with applicable foreign regulatory requirements. If we fail to comply with regulatory

requirements
in international markets or to obtain and maintain required approvals, our ability to market to our full target market will be reduced and our ability to realize the full market potential
of our product candidates will be harmed.

We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with
such approval may adversely affect our business.

We have received conditional approval from the FDA for the use of Twirla as the proprietary name for our lead product candidate, AG200-15.
However, this approval is conditioned upon a further and final review by the FDA at the time of NDA approval. If and when we resubmit the Twirla NDA, we would expect the FDA to perform a final review
of Twirla as a proprietary name. Additionally, any name we intend to use for our other potential product candidates will require approval from the FDA regardless of whether we have secured a formal
trademark registration from the U.S. Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed product names, including an evaluation of the potential for confusion with
other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to any
of our proposed product names, we may be required to adopt alternative names for our product candidates. If we adopt alternative names, we would lose the benefit of our existing trademark applications
for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not
infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit
our ability to commercialize our product candidates.

Our relationships with physicians, customers and payors will be subject to applicable anti-kickback, fraud
and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm
and diminished profits and future earnings.

Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any product candidates that we
commercialize. Our arrangements with third-party payors, including government healthcare programs, and customers will expose us to broadly-applicable fraud and abuse and other healthcare laws and
regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute Twirla, if approved, and any other potential product candidates we
commercialize. Restrictions under applicable federal and state healthcare laws and regulations include the following:



The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or
service for which payment may be made under federal healthcare programs such as Medicare and Medicaid;



The federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or
entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an
obligation to pay money to the federal government;



The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created federal criminal statutes that prohibit executing a
scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, impose
obligations on covered healthcare providers, health plans and healthcare clearinghouses, as well as their business associates that create receive, maintain or transmit individually identifiable health
information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;



The federal physician payment transparency requirements under the ACA and applicable regulations require manufacturers of drugs, devices,
biologics and medical supplies to report certain information to the Department of Health and Human Services including information related to payments and other transfers of value made to physicians
and teaching hospitals and the ownership and investment interests held by physicians and their immediate family members; and



Analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply to sales or marketing arrangements and
claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require pharmaceutical companies to comply with the
pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information
related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing; and state laws governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

The
risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the relevant government or regulatory
authorities or the courts, and their provisions are open to a variety of interpretations. Moreover, recent healthcare reform legislation has strengthened these laws. For example, the ACA, among other
things, amended the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes; such that a person or entity no longer needs to have actual knowledge of these statutes or
specific intent to violate them. In addition, the ACA provided that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute
constitutes a false or fraudulent claim for purposes of the false claims statutes.

Efforts
to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations are costly. It is possible that governmental authorities
will conclude that our business practices may not comply with current or future statutes, regulations or case law involving
applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities conducted by our sales team in the sale of Twirla or our other potential
product candidates, if approved, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to a variety of different consequences,
depending upon which law we are found to have violated, including significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such
as Medicare and Medicaid, corporate integrity agreements, refusal of government contracts, contract debarment and the curtailment or restructuring of our operations. If any of the physicians or other
providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from government funded healthcare programs.

We may not be able to protect our proprietary technology in the marketplace.

We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws, and
confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. Our success depends in large part on our ability and any future licensee's
ability to maintain our patents and to obtain additional patent protection in the United States and other countries with respect to our proprietary technology and products. We believe we will be able
to obtain, through prosecution of our pending patent applications, additional patent protection for our proprietary technology. If we are compelled to spend significant time and money protecting or
enforcing our patents, designing around patents held by others or licensing or acquiring, potentially for large fees, patents or other proprietary rights held by others, our business and financial
prospects may be harmed. If we are unable to effectively protect the intellectual property that we own, other companies may be able to offer for sale the same or similar products containing the
generically available active pharmaceutical ingredients in our product candidates, which could materially adversely affect our competitive business position and harm our business prospects. Our
patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing the same or similar products or limit the length of term of patent
protection that we may have for our product candidates. Even if our patents are unchallenged, they may not adequately protect our intellectual property, provide exclusivity for our
product candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our
business.

The
patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the United States and many jurisdictions
outside of the United States is not consistent. For example, in many jurisdictions the support standards for pharmaceutical patents are becoming increasingly strict. Some countries prohibit method of
treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or create
uncertainty. In addition, publication of information related to our current product candidates and potential products may prevent us from obtaining or enforcing patents relating to these product
candidates and potential products, including without limitation transdermal delivery systems and methods of using such transdermal delivery systems. Our product candidates contain generically
available active pharmaceutical ingredients. As a result, new chemical entity patents directed to the active pharmaceutical ingredients in our product candidates, which are generally believed to offer
the strongest form of patent protection, are not available for our product candidates.

Patents
that we own or may license in the future do not necessarily ensure the protection of our intellectual property for a number of reasons, including without limitation the
following:



The active pharmaceutical ingredients in our product candidates are generic and therefore our patents do not include claims directed solely to
the active pharmaceutical ingredients;



Our patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our product
candidates using the same active pharmaceutical ingredients;



There can be no assurance that the term of patent protection will be long enough for our company to realize sufficient economic value under the
patents following commercialization of our product candidates;



We do not expect, upon approval of our NDA, to receive patent term restoration under the Hatch-Waxman Act for the patents that have been, or
will be, submitted to the FDA for listing in the Orange Book;

Our issued patents and pending patent applications that may issue as patents in the future may not prevent entry into the U.S. market or other
markets of generic versions of our Twirla and AG890 product candidates;



Our patents may face paragraph IV challenges from potential generic 505(b)(2) applicants, asserting that our applicable patents are
invalid, enforceable, or will not be infringed by the manufacture, use, or sale of the competitive drug product;



We do not at this time own or control issued foreign patents in all markets that would prevent generic entry into some markets for our product
candidates;



We may be required to disclaim part of the term of one or more patents;



There may be prior art of which we are not aware that may affect the validity or enforceability of one or more patent claims;



There may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which,
nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim;



There may be other patents issued to others that will affect our freedom to operate;



If our patents are challenged, a patent office or a court could determine that they are invalid or unenforceable;



There might be changes in the law that governs patentability, validity and infringement of our patents that adversely affects the scope or
enforceability of our patent rights;



A court could determine that a competitor's technology or product that is the same as or similar to, our product candidates does not infringe
our patents; and



Our patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory
licensing.

If
we encounter delays in our development or clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced.

Our
competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic
versions of any approved products by submitting abbreviated new drug applications to the FDA in which our competitors claim that our patents are invalid, unenforceable or not infringed. Alternatively,
our competitors may seek approval to market their own products that are the same as, similar to or
otherwise competitive with our product candidates. In these circumstances, we may need to defend or assert our patents, by means including filing lawsuits alleging patent infringement. In any of these
types of proceedings, a court or government agency with jurisdiction may find our patents invalid, unenforceable or not infringed. We may also fail to identify patentable aspects of our research and
development before it is too late to obtain patent protection. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes
sufficient to achieve our business objectives.

The
issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In that regard, third parties may challenge our patents in the
courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable,
in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our
technology and potential products. In addition, given the amount of time required for the development, testing and regulatory review of new

product
candidates, patents protecting such candidates might expire or be held invalid or unenforceable before our company can realize sufficient economic value following commercialization of our
product candidates.

Our intellectual property portfolio is currently comprised of issued patents and pending patent applications.
If our issued patents are found to be invalid, not enforceable or not infringed by competitor products, or pending patent applications fail to issue or fail to issue with a scope that is meaningful to
our product candidates, our business will be adversely affected.

There can be no assurance that our pending patent applications will result in issued patents in the United States or foreign jurisdictions in
which such applications are pending. Even if patents do issue on any of these applications, there can be no assurance that a third-party will not challenge their validity or enforceability, that we
will obtain sufficient claim scope or term in those patents to prevent a third party from competing successfully with our product candidates, or that, even if our patents are found to be valid,
enforceable, and infringed, a legal tribunal would enjoin infringing activity.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many
companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing
countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. To the extent that we have obtained or are able to obtain
patents or other intellectual property rights in any foreign jurisdictions, it may be difficult for us to stop the infringement of our patents or the misappropriation of other intellectual property
rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the availability of
certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no
benefit.

Proceedings
to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly,
our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries
may affect our ability to obtain adequate protection for our technology and product candidates, and the enforcement of intellectual property.

Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of
our patent applications and the enforcement or defense of our issued patents.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a
number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. In particular, under the
Leahy-Smith Act, the United States transitioned in March 2013 to a "first to file" system in which the first inventor to file a patent application will be entitled to the patent. Third parties
are allowed to submit prior art before the issuance of a patent by the USPTO and may become involved in post-grant proceedings including reexamination, post-grant review, inter
partes review, or derivation or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission,
proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.

The
USPTO has developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act,
and in particular, the first to file provisions, did not become effective until March 16, 2013. However, the full impact of the Leahy-Smith Act and the courts' review of any appeals to related
proceedings, is in its early stages. Accordingly, the full impact that the Leahy-Smith Act will have on the operation of our business is not clear. However, the Leahy-Smith Act and its implementation
could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, as well as our ability to bring about timely
favorable resolution of any disputes involving our patents and the patents of others.

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary,
fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime
of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent
application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which
noncompliance can result in unenforceability, invalidity, abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Noncompliance events that could result in unenforceability, invalidity, abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions
within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or any future licensors fail to maintain the patents and patent applications
covering our product candidates, our competitive position would be adversely affected.

We may infringe the intellectual property rights of others, which may prevent or delay our product
development efforts and stop us from commercializing or increase the costs of commercializing our products, when and if approved.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of
third parties. For example, there could
be issued patents of which we are not aware that our current or future product candidates infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found
to infringe.

Moreover,
patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs
substantially later than the date on which the underlying discoveries were made and patent applications were filed. There may be currently pending applications of which we are unaware that may later
result in issued patents that our current or future product candidates infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that our current or
future product candidates infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of continuation, divisional or continuation-in-part
applications, in order to maintain the pendency of a patent family and attempt to cover our product candidates.

Third
parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property infringement or
misappropriation. These lawsuits are costly and could adversely affect our results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent
infringement, we would need to demonstrate that our product candidates or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid or unenforceable, and
we may not be able to do this.

Proving
invalidity or unenforceability is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity
enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in
pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that
any third-party patents are valid, enforceable and cover our product candidates or their use, the holders of any of these patents may be able to block our ability to commercialize our product
candidates unless we acquire or obtain a license under the applicable patents or until the patents expire. We may not be able to enter into licensing arrangements or make other arrangements at a
reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our product candidates or lead to prohibition of the
manufacture or sale of product candidates by us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We
could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary
damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or
force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information, know-how or trade
secrets could have a similar negative impact on our business. In addition, any uncertainties resulting from the initiation and continuation of any litigation
could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

We may be subject to claims that we or our employees have misappropriated the intellectual property,
including know-how or trade secrets, of a third party, or that claim ownership of what we regard as our own intellectual property.

Many of our employees, consultants and contractors were previously employed at or engaged by biotechnology companies or other pharmaceutical
companies, including our competitors or potential competitors. Some of these employees, consultants and contractors, including each member of our senior management, executed proprietary rights,
non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees, consultants and contractors do not use the intellectual
property and other proprietary information or know-how or trade secrets of others in their work for us, we may be subject to claims that we or these employees, consultants and contractors have used or
disclosed such intellectual property, including know-how, trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. We are not aware of any threatened
or pending claims related to these matters or concerning agreements with our senior management, or other of our employees, consultants and contractors, but litigation may be necessary in the future to
defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, or personnel or access to consultants
and contractors. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In
addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such
intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by
or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific
personnel.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary technological advances and know-how, especially where we do not believe patent protection is
appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, contractors, outside scientific
collaborators, sponsored researchers and other advisors, including the third parties we rely on to manufacture our product candidates, to protect our trade secrets and other proprietary information.
However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets. Accordingly, these agreements may not
effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Further, the
FDA, as part of its Transparency Initiative, a proposal to increase disclosure and make data more accessible to the public, is currently considering whether to make additional information publicly
available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA's disclosure policies
may change in the future, if at all. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our
products or cause additional, material adverse effects upon our competitive business position and financial results.

Any lawsuits relating to infringement of intellectual property rights brought by or against us will be costly
and time consuming and may adversely impact the price of our common stock.

We may be required to initiate litigation to enforce or defend our intellectual property rights. These lawsuits can be very time consuming and
costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially
increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

In
infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection
with intellectual property litigation, there is a risk that some of our confidential information and trade secrets could be compromised by disclosure during litigation. Moreover, there can be no
assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert
against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of
such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties
resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

In
addition, our patents and patent applications in the United States and other jurisdiction could face other challenges, such as derivation or interference proceedings, opposition
proceedings, inter partes review, reexamination proceedings, third party submissions of prior art, and other forms of post-grant challenges. In the
United States, for example, post-grant review, which is similar to opposition proceedings available in many countries other than the U.S., was newly established by the Leahy-Smith Act. Any of these
challenges, if successful, could result in the invalidation of, or in a narrowing of the scope or preventing the issuance of, any of our patents and patent applications subject to challenge. Any of
these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel's time and attention.

In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or
investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.

Intellectual property disputes could cause us to spend substantial resources and distract our personnel from
their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant
expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any
future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.

Risks Related to the Development of Our Additional Potential Product Candidates

If we fail to develop and commercialize Twirla and our current pipeline of additional potential product
candidates, our prospects for future growth and our ability to reach or sustain profitability may be limited or never achieved.

A key element of our long-term strategy is to develop, obtain regulatory approval for and commercialize our portfolio of potential product
candidates in addition to Twirla. To do so, we plan to utilize our proprietary transdermal delivery technology, Skinfusion®, to develop additional potential product candidates. We may not
be successful in our efforts to develop our portfolio of additional potential product candidates, and any product candidates we do develop may not produce commercially viable products that safely and
effectively treat their indicated conditions. To date, our efforts have identified three additional potential product candidates in addition to Twirla, including AG200-ER, which is a regimen designed
to allow a woman to extend the length of her cycle, AG200-SP, which is a regimen designed to provide shorter, lighter periods, and AG890, which is a progestin-only contraceptive patch intended for use
by women who are unable or unwilling to take estrogen. AG200-SP and AG200-ER are intended to be Twirla line extensions that would expand the use of Twirla beyond its initial approved use. In July
2016, we began preparations for an initial Phase 2 clinical trial examining the use of AG200-SP along with a smaller lower dose combination EE/LNG patch (SmP) in the fourth week of the woman's
cycle. We have decided to postpone the trial and will continue to evaluate the timing for initiating dosing of subjects for this Phase 2 clinical trial, which is dependent on financial and
other capital resources. Our planned Phase 2 clinical trial of AG200-SP (SmP) is only the initial clinical trial in this program and AG200-SP (SmP) will require additional clinical trials to
establish the safety and efficacy of this product candidate. The other potential product candidates in our pipeline will require additional product development efforts to optimize patch formulations
and dosing. In addition, we will need to conduct additional clinical trials to establish the safety and efficacy of these potential product candidates, which will require additional capital. We would
be unable to develop these potential product candidates, in particular AG200-SP and AG200-ER, if we are unable to get Twirla approved. Substantially all of our resources are currently dedicated to
developing and seeking regulatory approval for Twirla. We will require additional capital to resume and complete the commercialization plan for Twirla, if approved, and to advance the development of
our other potential product candidates.

If
we are unable to obtain development partners or additional development program funding, or to continue to devote substantial technical and human resources to such programs, we may have to delay or
abandon these programs. Any product candidate that we successfully identify may require substantial additional development efforts prior to commercial sale, including preclinical studies, extensive
clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are susceptible to the risks of failure that are inherent in pharmaceutical product
development.

We may be unable to license or acquire suitable additional product candidates or technologies from third
parties for a number of reasons.

The licensing and acquisition of pharmaceutical products is competitive. A number of more established companies are also pursuing strategies to
license or acquire products. These established companies may have a competitive advantage over us due to their size, cash resources or greater clinical development and commercialization capabilities.
In addition, we expect competition in acquiring product candidates to increase, which may lead to fewer suitable acquisition opportunities for us as well as higher acquisition prices.

Other
factors that may prevent us from licensing or otherwise acquiring suitable product candidates include the following:



We may be unable to license or acquire the relevant technology on terms that would allow us to make an appropriate return on our investment in
such product;



Companies that perceive us to be their competitor may be unwilling to assign or license their product rights to us;



We may be unable to identify suitable products or product candidates within our areas of expertise; or



We may not have sufficient funds to acquire, develop or commercialize additional product candidates or technologies.

Risks Related to Our Business Operations and Industry

In order to establish our sales and marketing infrastructure, we will need to grow the size of our
organization, and we may experience difficulties in managing this growth.

As of December 31, 2018, we had a total of 13 full-time employees after a reduction in our workforce, which resulted in the elimination
of the positions of several employees primarily from our commercial and clinical teams, representing approximately thirty percent of our employees. We use third-party consultants to assist with our
current, limited sales and marketing functions. As our development and commercialization plans and strategies develop, we expect to need to expand the size of our employee base for managerial,
operational, commercial, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify,
recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote
a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize Twirla, if approved, and any other future product candidates and our
ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.

If we are not successful in attracting and retaining highly qualified personnel, we may not be able to
successfully implement our business strategy.

Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly
qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel. In order to induce valuable employees to remain with us, we have
provided these employees with stock options that vest over time. In June 2018, we announced a reduction in our workforce, which resulted in the termination of approximately thirty percent of our
employees. On June 20, 2018, after the reduction in workforce, we adopted a retention plan that provides all of our remaining employees (i) future cash retention payments to induce such
employees to remain employed by us through December 31, 2018 and (ii) stock option grants that vest over time in four equal installments to induce such employees to remain employed by us
through December 31, 2019. The value to employees of stock options that vest over time is significantly affected by movements in our stock price that we cannot control and may at any time be
insufficient to counteract more lucrative offers from other companies.

Our
management team has expertise in many different aspects of drug development and commercialization. Competition for skilled personnel in our market is intense and competition for
experienced personnel may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific
and medical teams may terminate their employment with us on short notice. We have employment agreements with our named executive officers which includes Alfred Altomari, our Chairman and Chief
Executive Officer. The employment agreements provide for at-will employment, which means that Mr. Altomari or any of our other employees could leave our employment at any time, with or without
notice. The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results or financial condition. In particular, we believe that
the loss of the services of Mr. Altomari, or Dr. Elizabeth Garner, our Chief Medical Officer, may have a material adverse effect on our business. We do not currently carry "key person"
insurance on the lives of members of executive management. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as
well as junior, mid-level and senior scientific and medical personnel.

Other
pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than
we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those that we
have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate of and success with which we can develop and commercialize product candidates would be limited.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be
required to limit commercialization of Twirla or our other potential product candidates, if approved.

We face a potential risk of product liability as a result of the clinical testing of Twirla and our other potential product candidates and will
face an even greater risk if we commercialize Twirla or our other potential product candidates, if approved or any other current or future product candidate. For example, we may be sued if any product
candidate we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations
of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state
consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of the product
candidate subject to such claims. Even successful defense would

The inability to commercialize Twirla or our other potential product candidates, if approved;



A decline in our stock price; and



Exposure to adverse publicity.

We
have obtained limited product liability insurance coverage for our clinical trials with a $10.0 million annual aggregate coverage limit. Our inability to obtain and retain
sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of product candidates we develop.
Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or
that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may
have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain,
sufficient capital to pay such amounts.

We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the
benefits of such acquisitions or alliances.

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will
complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to
successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a
strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve
the expected synergies to justify the transaction.

We continue to incur significant increased costs as a result of operating as a public company, and our
management is required to devote substantial time to compliance initiatives.

As a public company, we continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In
addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on public companies, including requiring establishment
and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate governance practices. Our

management
and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and
have made some activities more time-consuming and costly. We estimate that we will annually incur approximately $2.0 million in expenses in response to these requirements.

Section 404(a)
of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second
annual report that we would expect to file with the SEC. However, for as long as we remain an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we
intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to,
not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. We may take advantage of these reporting exemptions until we are no longer an
"emerging growth company." We will remain an emerging growth company until December 31, 2019. If on June 28, 2019, the aggregate market value of our voting stock held by non-affiliates
is less than $75 million, an auditor attestation report over Internal Controls over Financial Reporting will not need to be included in the 2019 Form 10-K.

Our
testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to
be material weaknesses. We will incur substantial accounting expense and expend significant management efforts to comply with internal control over financial reporting requirements. We currently do
not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are
not able to comply with these requirements in a timely manner or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting
that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory
authorities, which would require additional financial and management resources.

Business interruptions could delay us in the process of developing our product candidates and could disrupt
our sales.

Our headquarters are located in Princeton, New Jersey, and Corium, our contract manufacturer, is located in Grand Rapids, Michigan. We are
vulnerable to natural disasters, such as severe storms and other events that could disrupt our or Corium's operations. We do not carry insurance for natural disasters, and we may not carry sufficient
business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our business operations.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely,
are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the
internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through
cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and
intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs.
For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase

our
costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.

We are exposed to the risk that employees, independent contractors, principal investigators, CROs, manufacturers, consultants, commercial
partners and vendors may engage in fraudulent or other illegal activity, fraud or other misconduct. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure
of unauthorized activities to us that violates: (i) the law and regulations of the FDA and non-U.S. regulators, including those laws that require the reporting of true, complete and accurate
information to the FDA and non-U.S. regulators, (ii) healthcare fraud and abuse laws and regulations in the United States and abroad and (iii) laws that require the true, complete and
accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to
prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other business arrangements. Misconduct in violation of these laws may also involve the improper use of information obtained in the course
of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter misconduct by
our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including regulatory enforcement actions, the imposition of significant civil, criminal and
administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, corporate integrity agreements, contractual
damages, reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of
operations.

Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce
future tax payments may be limited by provisions of the Internal Revenue Code of 1986, as amended, and may be subject to further limitation as a result of our initial public offering.

Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, contain rules that limit the ability of a company
that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards
and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders owning, directly or indirectly, 5% or
more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the
use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term tax-exempt rate and the value of the company's stock immediately
before the ownership change. We may be unable to offset future taxable income, if any, with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur
larger federal income tax liability. Our net operating loss carryforwards arising in

taxable
years ending on or prior to December 31, 2017 will expire between 2018 and 2037 if we have not used them. Net operating loss carryforwards arising in taxable years ending after
December 31, 2017 are no longer subject to expiration under the Code.

In
addition, it is possible that the transactions relating to our initial public offering or subsequent public offerings, either on a standalone basis or when combined with future
transactions, have caused us to undergo one or more additional ownership changes. In that event, we generally would not be able to use our pre-change loss or credit carryovers or certain built-in
losses prior to such ownership change to offset future taxable income in excess of the annual limitations imposed by Sections 382 and 383 of the Code. We have not completed a study to assess
whether an ownership change has occurred, or whether there have been multiple ownership changes since our inception.

Risks Related to Ownership of Our Common Stock

We are not in compliance with the Nasdaq continued listing requirements. If we are unable to comply with the
continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to raise
capital.

On July 2, 2018, we received a letter from The Nasdaq Stock Market LLC, or Nasdaq, indicating that we have failed to comply with
the minimum bid price requirement of Nasdaq Listing Rule 5450(a)(1). Nasdaq Listing Rule 5450(a)(1) requires that companies listed on the Nasdaq Global Market maintain a minimum closing
bid price of at least $1.00 per share. The notification of noncompliance had no immediate effect on the listing or trading of our common stock.

Under
Nasdaq Listing Rule 5810(c)(3)(A), we had a 180-calendar day grace period, or until December 31, 2018, to regain compliance by meeting the continued listing standard.
The continued listing standard would have been met if our common stock had a minimum closing bid price of at least $1.00 per share for a minimum of ten consecutive business days during the
180-calendar day grace period.

We
did not come into compliance by December 31, 2018. On January 2, 2019, we received approval from the Listing Qualifications Department of Nasdaq to transfer the listing
of our stock to the Nasdaq Capital Market. Following the transfer of the listing, we have been granted an additional 180 calendar day period to regain compliance with Nasdaq's $1.00 minimum bid price
requirement. The additional 180-day grace period will end on July 1, 2019.

If
we do not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be
subject to delisting. At that time, we may appeal the Nasdaq staff's determination to a Hearings Panel.

We
intend to monitor the closing bid price of our common stock and consider our available options to resolve the noncompliance with the minimum bid price requirement. No determination
regarding our response has been made at this time. There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with
other Nasdaq listing criteria. If our securities are delisted, it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer
a material decline. Delisting could also impair the liquidity of our common stock and could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at
all, and may result in potential loss of confidence by investors, employees, and fewer business development opportunities.

We expect that our stock price may fluctuate significantly.

The trading price of our common stock is highly volatile and is subject to wide fluctuations in response to various factors, some of which are
beyond our control, including limited trading volume. In

addition
to the factors discussed in this "Risk Factors" section and elsewhere in this quarterly report, these factors include:



Any delay in filing our response to the 2017 CRL received from the FDA with respect to Twirla and any adverse development or perceived adverse
development with respect to the FDA's review of our response;

Disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection
for our technologies;



Announcement or expectation of additional debt or equity financing efforts;



Sales of our common stock by us, our insiders or our other stockholders; and



General economic and market conditions.

These
and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which
may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, the stock market in general, and
the Nasdaq Capital Market and the stock prices of pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the
company

that
issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our
management.

We may be subject to securities litigation, which is expensive and could divert management attention.

Our market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their
stock have been subject to securities class action litigation. We may be the target of this type of litigation. Litigation of this type could result in substantial costs and diversion of management's
attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities. On January 6, 2017, and
January 20, 2017, two previously disclosed complaints captioned Peng v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner ,
No. 17-cv-119 (D.N.J.), and Lichtenthal v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner , No. 17-cv-405
(D.N.J.), respectively, were filed in the United States District Court for the District of New Jersey on behalf of a putative class of investors who purchased shares of our common stock from
March 9, 2016, through January 3, 2017. The complaints alleged violations of the federal securities laws based on public statements made regarding our Phase 3 SECURE clinical
trial and sought an unspecified amount of damages to be determined at trial. We denied all allegations in the complaints. On May 15, 2017, the complaints were consolidated as In re Agile Therapeutics, Inc. Securities
Litigation, Master File No. 17-cv-119 (D.N.J.), and Hoyt W. Clark was appointed as class
representative for the putative class. On June 26, 2017, Mr. Clark agreed to dismiss the case voluntarily, without payment by us of any consideration and with each side bearing its own
attorneys' fees and costs. The presiding judge dismissed the consolidated action with prejudice as to all defendants on July 13, 2017.

Our existing principal stockholders, executive officers and directors own a significant percentage of our
common stock and will be able to exert a significant control over matters submitted to our stockholders for approval.

As of December 31, 2018, our executive officers, directors, director nominees, holders of 5% or more of our capital stock and their
respective affiliates together beneficially owned approximately 36.8% of our outstanding voting stock.

As
a result, these stockholders, if they acted together, could significantly influence all matters requiring approval by our stockholders, including the election of directors and the
approval of mergers or other business combination transactions. These stockholders may be able to determine all matters requiring stockholder approval. The interests of these stockholders may not
always coincide with our interests or the interests of other stockholders. This may also prevent or discourage unsolicited acquisition proposals or offers for our common stock that other stockholders
may feel are in their best interest and our large stockholders may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value
for their common stock, and might affect the prevailing market price for our common stock.

We will have broad discretion in how we use the net proceeds from our public and private offerings. We may
not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

We will have considerable discretion in the application of the net proceeds from our completed public and private offerings. As a result,
investors will be relying upon management's judgment with only limited information about our specific intentions for the use of the balance of the net proceeds from our completed public and private
offerings. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds
from our completed public and private offerings in a manner that does not produce income or that loses value.

We are an "emerging growth company" and will be able to avail ourselves of reduced disclosure requirements
applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of
holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common
stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and
our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We will remain an emerging growth company until
December 31, 2019. If on June 28, 2019, the aggregate market value of our voting stock held by non-affiliates is less than $75 million, an auditor attestation report over Internal
Controls over Financial Reporting will not need to be included in the 2019 Form 10-K.

Our status as an "emerging growth company" under the JOBS Act may make it more difficult to raise capital as
and when we need it.

Because of the exemptions from various reporting requirements allowed to us as an "emerging growth company" we may be less attractive to
investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that
our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of
operations may be materially and adversely affected.

If we fail to maintain an effective system of internal control over financial reporting in the future, we may
not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to
fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent
registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive
changes to our financial statements or identify other areas for further attention or improvement. If we are unable to conclude that our internal control over financial reporting is effective, or if
our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its
Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to
sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to
implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure
controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to
management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal
controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These
inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our
control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

We have never paid dividends on our common stock and we do not anticipate paying any dividends in the
foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases.

We have not paid dividends on our common stock to date and we currently intend to retain our future earnings, if any, to fund the development
and growth of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you
will likely only experience a gain from your investment in our common stock if the price of our common stock increases.

If equity research analysts do not publish research or reports about our business or if they issue
unfavorable commentary or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our
business. We do not control these analysts. The price of our common stock could decline if one or more equity analysts downgrade our common stock or if analysts issue other unfavorable commentary or
cease publishing reports about us or our business.

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change
of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current
management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of
control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:



Authorize the issuance of preferred stock which can be created and issued by the board of directors without prior stockholder approval, with
rights senior to those of our common stock;



Provide for a classified board of directors, with each director serving a staggered three-year term;

Require any action instituted against our officers or directors in connection with their service to the Company to be brought in the state of
Delaware.

In
addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of
our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for
stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy
contest involving our company. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders. Any delay or
prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our principal offices occupy approximately 8,200 square feet of leased office space in Princeton, New Jersey pursuant to a lease agreement that
expires in November 2020. We believe that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees,
and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Our common stock was listed on the Nasdaq Global Market under the symbol "AGRX" from May 23, 2014 through January 2, 2019.
Beginning on January 3, 2019, our common stock has been listed on the Nasdaq Capital Market under the symbol "AGRX".

High

Low

Year Ended December 31, 2018

Fourth Quarter

$

1.30

$

0.33

Third Quarter

$

0.92

$

0.23

Second Quarter

$

3.00

$

0.49

First Quarter

$

3.92

$

2.40

Year Ended December 31, 2017

Fourth Quarter

$

5.40

$

1.93

Third Quarter

$

5.60

$

3.04

Second Quarter

$

4.25

$

2.90

First Quarter

$

5.81

$

1.82

As
of March 11, 2019, we had 32 holders of record of our common stock. The actual number of shareholders is greater than this number of record holders and includes shareholders
who are beneficial owners but whose shares are held in street name by brokers and other nominees. The number of holders of record also does not include shareholders whose shares may be held in trust
by other entities. The closing price of our common stock on March 11, 2019 was $1.44.

Dividends

We have never declared or paid a cash dividend on our capital stock. We currently intend to retain any future earnings and do not expect to pay
any dividends in the foreseeable future. Any future determinations to pay cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a
number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other factors that our board may deem
relevant.

Stock Performance Graph

This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or the
Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Exchange Act or the Securities Act
of 1933, as amended.

The
following graph shows a comparison from May 23, 2014 (the date our common stock commenced trading of the Nasdaq Global Market) through December 31, 2018 of the
cumulative total return for our common stock, and the Nasdaq Composite Index and The Nasdaq Biotechnology Index. The graph assumes that $100 was invested at the market close on May 23, 2014 in
the common stock of Agile Therapeutics, Inc., the Nasdaq Composite Index and The Nasdaq Biotechnology Index and assumes reinvestments of dividends. The stock price performance of the following
graph is not necessarily indicative of future stock price performance.

Recent Sales of Unregistered Securities and Use of Proceeds from Registered
Securities

None.

Issuer Purchases of Equity Securities

None.

Item 6. Selected Financial Data

The following table sets forth our selected financial data for the periods indicated. You should read the following selected financial data in
conjunction with our audited financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K and the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of this Annual Report on Form 10-K.

We
have derived the statement of operations data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 from our
audited financial statements included elsewhere on this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2015 and 2014 and the balance sheet
data as of December 31, 2016, 2015 and 2014 are derived from our audited financial statements that are not included in this Annual

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations is provided to enhance the
understanding of, and should be read in conjunction with, Part I, Item 1, "Business" and Item 8, "Financial Statements and Supplementary Data." For information on risks and
uncertainties related to our business that may make past performance not indicative of future results or cause actual results to differ materially from any forward-looking statements, see "Special
Note Regarding Forward-Looking Statements," and Part I, Item 1A, "Risk Factors." Dollars in tabular format are presented in thousands, except per share data, or as otherwise
indicated.

Overview

We are a forward-thinking women's healthcare company dedicated to fulfilling the unmet health needs of today's women. Twirla® and
our other current potential product candidates are designed to provide women with contraceptive options that offer greater convenience and facilitate compliance. Our lead product candidate, Twirla,
also known as AG200-15, is a once-weekly prescription combination hormonal contraceptive patch that is at the end of Phase 3 clinical development. We plan to resubmit our new drug application,
or NDA, for Twirla to the U.S. Food and Drug Administration, or FDA, in the second quarter of 2019.

Our
planned resubmission is intended to be a complete response to the 2017 CRL and will include the results from the comparative wear study, additional information on our manufacturing
process, and other analyses responding to the 2017 CRL. Consistent with our previous NDA resubmission in 2017, we currently expect that our resubmission will be categorized as a Type 2
resubmission and receive a review period of six months from the date of resubmission of the NDA. Following the resubmission, we anticipate that FDA will likely re-inspect our contract manufacturer,
Corium, and hold an Advisory Committee meeting to review of the safety and efficacy of Twirla. For more information about the regulatory history of Twirla, please see Part 1, Item 1, "BusinessTwirla Clinical
Development Program and Regulatory History."

Financial Overview

Since our inception in 1997, we have devoted substantial resources to developing and seeking regulatory approval for Twirla, building our
intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. We incurred research and development expenses of
$9.8 million, $14.4 million and $20.9 million during the years ended December 31, 2018, 2017 and 2016, respectively. We anticipate that a portion of our operating expenses
will continue to be related to research and development as we continue to develop Twirla. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for
Twirla.

We
have funded our operations primarily through sales of common stock, convertible preferred stock, convertible promissory notes and term loans. As of December 31, 2018 and 2017
respectively, we had $7.8 million and $35.9 million in cash and cash equivalents.

In
February 2015, we entered into a loan and security agreement with Hercules Capital, Inc. or Hercules, for a term loan of up to $25.0 million, which we refer to as the
Hercules Loan Agreement. A
first tranche of $16.5 million was funded upon execution of the Hercules Loan Agreement, approximately $15.5 million of which was used to repay our existing term loan. The Hercules Loan
Agreement was amended in August 2016 to, among other things, extend the period during which we could have drawn the additional tranche of $8.5 million to March 31, 2017 and extended the
period during which we make interest-only payments until January 31, 2017. The Hercules Loan Agreement was further amended in May 2017 to extend the period during which we could have drawn the
additional tranche of $8.5 million to January 31, 2018. The period during which the additional tranche of $8.5 million may be drawn has expired and therefore the
$8.5 million can no longer be drawn by us.

On
February 1, 2017, we began making principal payments with respect to the Hercules Loan Agreement. The final payment under the Hercules Loan Agreement was made on December 1, 2018 and
we had no outstanding borrowings under the Hercules Loan Agreement as of December 31, 2018.

In
January 2016, we closed an underwritten public offering of 5,511,812 shares of common stock at a public offering price of $6.35 per share. In February 2016, the underwriters of the
public offering of common stock exercised in full their option to purchase an additional 826,771 shares of common stock at the public offering price of $6.35 per share, less underwriting discounts and
commissions. A total of 6,338,583 shares of common stock were sold in the public offering, resulting in total net proceeds of approximately $37.5 million.

In
August 2017, we completed an underwritten public offering of 5,333,334 shares of common stock at a public offering price of $3.75 per share. Proceeds from our August 2017 public
offering, net of underwriting discounts, commissions and other offering costs, were approximately $18.5 million.

We
have not generated any revenue and have never been profitable for any year. Our net loss was $19.8 million, $28.3 million and $28.7 million for the years ended
December 31, 2018, 2017 and 2016, respectively. We expect to incur increased expenses and increasing operating losses for the foreseeable future as we seek the approval of our NDA for Twirla,
which include conducting the wear study of Twirla and Xulane suggested by the FDA and preparing for an anticipated Advisory Committee meeting, complete the qualification and validation of our
commercial manufacturing process, initiate pre-launch commercial activities, commercially launch Twirla, if approved, advance our other potential product candidates and expand our research and
development programs. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla.

Going Concern

We believe that our cash and cash equivalents as of December 31, 2018 along with the proceeds from our private placement completed in
March 2019, will be sufficient to meet our projected operating requirements into the fourth quarter of 2019. We will require additional capital to fund our operating needs for the remainder of the
fourth quarter of 2019 and beyond including, among other items, the resumption and completion of our commercial plan for Twirla, which primarily includes the validation of our commercial manufacturing
process and the commercial launch of Twirla, if approved, and advancing the development of our other potential product candidates.

Pursuant
to the receipt of the 2017 CRL, and the delay in the approval timeline for Twirla, our ability to continue operations for the remainder of the fourth quarter of 2019 and beyond
will depend on our ability to obtain additional funding, as to which no assurances can be given. Based upon the foregoing, management has concluded that there is substantial doubt about our ability to
continue as a going concern. There can be no assurance that any financing by us can be realized, or if realized, what the terms of any such financing may be, or that any amount that we are able to
raise will be adequate.

As
of December 31, 2018, we had cash and cash equivalents of $7.8 million. In March 2019, we completed a private placement of approximately 8.4 million shares of our
common stock resulting in gross proceeds of approximately $7.8 million. Our future success depends on our ability to raise additional capital and/or implement various strategic alternatives. We
continue to analyze strategic and financing alternatives, potential asset sales as well as mergers and acquisitions. We cannot be certain that these initiatives or raising additional capital, whether
through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us. If we issue additional
securities to raise funds, whether through the issuance of equity or convertible debt securities, or any combination thereof, these securities may have rights, preferences, or privileges senior to
those of our common stock, and our current stockholders will experience dilution. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to
take specific actions, such as incurring additional debt, making capital

expenditures
or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs or product candidates, including Twirla, or grant licenses on terms that may not be favorable to us. If we are unable to obtain
funds when needed or on acceptable terms, we then may be unable to complete the development of Twirla, and may also be required to further cut operating costs, forego future development and other
opportunities and may need to seek bankruptcy protection.

The
financial statements as of December 31, 2018 have been prepared under the assumption that we will continue as a going concern for the next 12 months. Our ability to
continue as a going concern is dependent upon our uncertain ability to obtain additional equity and/or debt financing and reduce expenditures. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

We
do not own any manufacturing facilities and rely on Corium for all aspects of the manufacturing of Twirla. We will need to continue to invest in the manufacturing process for Twirla,
and incur significant expenses, in order to complete the equipment qualification and validation related to the expansion of Corium's manufacturing capabilities in order to be capable of supplying
projected commercial quantities of Twirla, if approved. We continue to plan the process of scaling up the commercial manufacturing capabilities for Twirla with Corium and the associated costs and
timelines. We expect the validation and expansion of our commercial manufacturing process to be completed after the approval of Twirla. If we obtain regulatory approval for Twirla, we expect to incur
significant expenses in order to create an infrastructure to support the commercialization of Twirla, including sales, marketing, distribution, medical affairs and compliance functions, which will
require additional capital.

We
have incurred and will continue to incur additional costs associated with operating as a public company. Accordingly, we will need additional financing to support our continuing
operations and other potential product candidates in our pipeline in addition to the commercial activities required for the pre-launch and launch of Twirla, if approved. We will seek to fund our
operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on
acceptable terms, or at all. Our failure to raise additional capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will
need to generate significant revenue to achieve profitability, and we may never do so.

Financial Operations Overview

Revenue

To date, we have not generated any revenue. In the future, we may generate revenue from product sales, license fees, milestone payments and
royalties from the sale of products developed using our intellectual property. Our ability to generate revenue and become profitable
depends on our ability to successfully commercialize Twirla and any product candidates that we may advance in the future. If we fail to complete the development of Twirla or any other product
candidates we advance in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, will be adversely
affected.

Since our inception, we have focused our resources on our research and development activities. Research and development expenses consist
primarily of costs incurred for the development of Twirla and other current and future potential product candidates, and include:



expenses incurred under agreements with contract research organizations, or CROs, and investigative sites that conduct our clinical trials and
preclinical studies;

Research
and development costs are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to
completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our third-party vendors.

Research
and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in
earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not currently utilize a formal time allocation system to capture expenses
on a project-by-project basis, as the majority of our past and planned expenses have been and will be in support of Twirla. In 2019, we expect our research and development expenses to remain
relatively consistent with 2018 expenses. Research and development expenses in 2019 will consist primarily of those costs associated with completing our wear study comparing the adhesion of Twirla and
Xulane, preparation and resubmission of the NDA for Twirla, the continued development and refinement of our commercial manufacturing process and responding to information requests expected to be
received from the FDA as part of their review of our NDA resubmission. As a result of the 2017 CRL, we have significantly scaled back equipment qualification and validation of our commercial
manufacturing process and resumption and completion of these activities will require additional capital.

To
date, our research and development expenses have related primarily to the development of Twirla. For the years ended December 31, 2018, 2017 and 2016, our research and
development expenses were approximately $9.8 million, $14.4 million and $20.9 million, respectively. The following table summarizes our research and development expenses by
functional area.

It
is difficult to determine with any certainty the exact duration and completion costs of any of our future clinical trials of Twirla or our other current and future potential product
candidates we may advance. It is also difficult to determine if, when or to what extent we will generate revenue from the commercialization and sale of our product candidates that obtain regulatory
approval.

Consistent
with our previous NDA resubmission in 2017, we currently expect that our resubmission of the NDA responding to the 2017 CRL will be categorized as a Type 2 resubmission
and receive a review period of six months from the date of resubmission of the NDA. We may, however, never succeed in
achieving regulatory approval for Twirla or any of our other potential product candidates or such approval may be delayed. The duration, costs and timing of clinical trials and development of our
other potential product candidates in addition to Twirla will depend on a variety of factors, including the uncertainties of future clinical trials and preclinical studies, the rate of subject
enrollment, obtaining additional capital, and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors,
including competition, manufacturing capability and commercial viability. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a
significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to conduct clinical
trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our
clinical trials, or experience issues with our manufacturing capabilities we could be required to expend significant additional financial resources and time with respect to the development of that
product candidate. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment
of each product candidate's commercial potential. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We will require additional
capital to fund our operating needs for the remainder of the fourth quarter of 2019 and beyond including, among other items, the resumption and completion of our commercial plan for Twirla, which
primarily includes the validation of our commercial manufacturing process and the commercial launch of Twirla, if approved, and advancing the development of our other potential product candidates.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance and administrative
functions including payroll taxes and health insurance, stock-based compensation and travel expenses. Other general and administrative expenses include facility-related costs, insurance and
professional fees for legal, patent review, consulting and accounting services. General and administrative expenses are expensed as incurred.

For
the years ended December 31, 2018, 2017 and 2016, our general and administrative expenses totaled approximately $8.7 million, $12.4 million and
$8.8 million, respectively. In January 2018, following our receipt of the 2017 CRL, we significantly scaled back our preparations for commercialization of Twirla, including commercial
pre-launch activities, pending our ability to address the 2017 CRL and receive approval of Twirla. However, if Twirla is approved, we intend to commercialize Twirla in the United States through a
direct sales force. We anticipate that our general and administrative expenses will increase in the future with the continued research, development and potential commercialization of Twirla, its
planned line extensions, and any of our other potential product candidates, and as we operate as a public company. These increases will likely include increased selling and marketing costs, including
payroll and operating costs, related to the commercial launch of Twirla, if approved, legal and accounting services, stock registration and printing fees, addition of new personnel to support
compliance and communication needs, increased insurance premiums, outside consultants and investor relations. Additionally, if in the future we believe regulatory

approval
of Twirla or any of our other potential product candidates appears likely, we anticipate that we would begin preparations for commercial operations, which would result in an increase in
payroll and other expenses, particularly with respect to the sales and marketing of our product candidates.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared
in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect
the reported amounts of assets, liabilities and expenses and related disclosures. On an ongoing basis, our actual results may differ significantly from our estimates.

Our
significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Annual Report on Form 10-K. We believe the
following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses, particularly for product
development costs. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the
level of services performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers
invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based
on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with service providers and make adjustments as necessary. Examples of estimated accrued
research and development expenses include:



fees paid to CROs in connection with clinical studies;



fees paid to investigative sites in connection with clinical studies;



fees paid to vendors in connection with preclinical development activities; and



fees paid to vendors related to product manufacturing, development and distribution of clinical supplies.

We
base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical
studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which
payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the
successful enrollment of subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of subjects,
number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the
accrued liability or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of
services performed relative to the actual status and timing of services performed may vary and may result in our reporting amounts that are too high or too low in any particular period. Based on
historical experience, actual results have not been materially different from our estimates.

We account for detachable warrants with non-standard anti-dilution provisions (referred to as down round protection) to purchase convertible
preferred stock (prior to our IPO) and common stock as liabilities, as they are freestanding derivative financial instruments. The warrants are recorded as liabilities at fair value, estimated using a
Black-Scholes option pricing model, and are subject to re-adjustment at each balance sheet date, otherwise known as marked-to-market, with changes in the fair value of the warrants recorded in our
statements of operations.

Stock-Based Compensation

We account for stock-based compensation under Accounting Standards Codification, or ASC, 718, Accounting for Stock Based
Compensation, under which compensation expense is generally recognized over the vesting period of the award. Determining the amount of stock-based compensation to be required
requires us to develop estimates of fair values of stock options as of the grant date.

We
account for stock-based compensation by measuring and recognizing expense for all stock-based payments made to employees and directors based on estimated grant date fair values. We
use the straight-line method to allocate compensation cost to reporting periods over each optionee's requisite service period, which is generally the vesting period. We estimate the fair value of our
stock-based awards to employees and directors using the Black-Scholes option valuation model, or Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including
the expected stock price volatility, the calculation of expected term and the fair value of the underlying common stock on the date of grant, among other inputs. The risk-free interest rate was
determined with the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options.

We
also award restricted stock units ("RSUs") to employees and our board of directors (the "Board"). RSUs are generally subject to forfeiture if employment terminates prior to the
completion of the vesting restrictions. We expense the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably
over the period during which the vesting restrictions lapse. Cost associated with performance-based restricted stock units with a performance condition which affects the vesting is recognized only if
the performance condition is probable of being satisfied.

Research and development expenses. Research and development expenses decreased by $4.6 million, or 32%, from
$14.4 million for the year
ended December 31, 2017 to $9.8 million for the year ended December 31, 2018. This overall decrease in research and development expenses was primarily due to the
following:



a decrease in manufacturing commercialization expenses of $2.4 million for the year ended December 31, 2018 as compared to the
year ended December 31, 2017. This decrease reflects reduced activity associated with the scale-up process and the on-going qualification process of the commercial manufacturing equipment
primarily as a result of the receipt of the 2017 CRL. Costs related to the qualification, validation and manufacture of Twirla will be recorded as research and development expenses until we receive
approval of our NDA for Twirla;



a decrease in clinical development expenses of $1.1 million for the year ended December 31, 2018 as compared to the year ended
December 31, 2017. This decrease primarily relates to the completion of the close-out activities associated with our SECURE clinical trial during 2017. There were no external costs related to
the SECURE clinical trial incurred during the year ended December 31, 2018; and



a decrease in regulatory expenses of $0.8 million for the year ended December 31, 2017 as compared to the year ended
December 31, 2018. This decrease primarily relates to reduction of regulatory activity during the year ended December 31, 2018 as compared the year ended December 31, 2017.
Regulatory expenses for the year ended December 31, 2017 included external costs associated with the preparation of our NDA resubmission and response to the FDA's CRL received by us in February
2013.

General and administrative expenses. General and administrative expenses decreased by 3.7 million, or 29%, from
$12.4 million for the
year ended December 31, 2017 to $8.7 million for the year ended December 31, 2018. This decrease in general and administrative expense was primarily due to the
following:



a decrease in commercial development expense of $3.2 million for the year ended December 31, 2018 as compared to the year ended
December 31, 2017. This decrease relates to the suspension

of
our pre-commercialization activities such as brand building, advocacy and consulting as a result of the receipt of the 2017 CRL;



a decrease in professional fees expense of $0.8 million for the year ended December 31, 2018 compared to the year ended
December 31, 2017. This decrease is primarily the result of a reduction in the use of consultants and lower legal and patent-related costs; and



an increase in personnel costs of $0.7 million for the year ended December 31, 2018 compared to the year ended
December 31, 2017, which partially offsets the decreases discussed above. This increase relates to the addition of personnel during the second half of 2017 to help prepare for launch of Twirla,
if approved.

Restructuring costs. In June 2018, we announced a reduction in our workforce, which resulted in the termination of several
employees primarily from
our commercial and clinical teams, representing approximately thirty percent of our employees. This workforce reduction, along with other reductions in planned operating expenses was designed to
preserve cash while we pursued formal dispute resolution with the FDA for Twirla and as we determine the regulatory path forward for the resubmission of our NDA for Twirla. In addition, in June 2018,
we also announced that we had adopted a retention plan to provide (i) cash retention payments to be made to all remaining employees in order to induce such employees to remain employed by us
through December 31, 2018 and (ii) stock option grants to all remaining employees in order to induce such employees to remain employed by us through December 31, 2019.
Restructuring costs of $1.0 million for the year ended December 31, 2018 represent $0.4 million of severance-related costs and $0.6 million of costs related to the accrual
of the retention bonus.

Interest income. Interest income comprises interest income earned on cash and cash equivalents.

Interest expense. Interest expense is primarily attributable to our term loan with Hercules for the years ended December 31,
2018 and 2017.
Interest expense also includes the amortization of the discount associated with allocating value to the common stock warrants issued to Hercules, the amortization of the deferred financing costs
associated with the term loan and the accrual of the final payment due to Hercules. Interest expense decreased by $0.8 million, or 42% from $1.9 million for the year ended
December 31, 2017 to $1.1 million for the year ended December 31, 2018. This decrease is primarily the result of a decrease in the principal outstanding under our term loan with
Hercules for the year ended December 31, 2018 as compared to the year ended December 31, 2017. The term loan with Hercules was paid off on December 1, 2018 and accordingly, we
expect no interest expense with respect to the Hercules loan in 2019.

Change in fair value of warrants. Certain of our warrants to purchase shares of our common stock are recorded at fair value and
are subject to
re-measurement at each balance sheet date. These liabilities are re-measured at each balance sheet date with the corresponding charge to earnings recorded within change in fair value of warrant
liability. The fair value of the common stock warrants with non-standard anti-dilution provisions are determined using the Black-Scholes option pricing model which incorporates a number of assumptions
and judgments to estimate the fair value of these warrants including the fair value per share of the underlying stock, the remaining contractual term of the warrants, risk-free interest rate, expected
dividend yield, credit spread and expected volatility of the price of the underlying stock. During the year ended December 31, 2018, we reported income of $29 thousand related to the
decrease in the fair value of the warrants as compared to income of $143 thousand for the year ended December 31, 2017.

Benefit from income taxes. For the year ended December 31, 2018, we received $0.5 million from the sale of New Jersey
state Net
Operating Loss Carryovers, or NOLs, as part of the Technology and Business Tax Certificate Program, or the Program. We did not receive any payments under the Program during the year ended
December 31, 2017. The Program enables approved biotechnology companies to

sell
their unused NOLs and unused Research and Development Tax Credits for at least 80% of the value of the tax benefits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. The
New Jersey Economic Development Authority and the New Jersey Department of the Treasury's Division of Taxation administer the Program. We have reached the maximum lifetime benefit of
$15.0 million under the Program and are no longer eligible to participate in the Program.

Comparison of Years Ended December 31, 2017 and 2016

Year ended
December 31,

2017

2016

Change

(In thousands)

Operating expenses:

Research and development

$

14,428

$

20,929

$

(6,501

)

General and administrative

12,383

8,792

3,591

​

​

​

​

​

​

​

​

​

​

​

Total operating expenses

26,811

29,721

(2,910

)

​

​

​

​

​

​

​

​

​

​

​

Other income (expense)

Interest income

282

117

165

Interest expense

(1,918

)

(2,446

)

528

Change in fair value of warrants

143

234

(91

)

​

​

​

​

​

​

​

​

​

​

​

Total other income (expense), net

(1,493

)

(2,095

)

602

Loss before benefit from income taxes

(28,304

)

(31,816

)

3,512

Benefit from income taxes



3,075

(3,075

)

​

​

​

​

​

​

​

​

​

​

​

Net loss

$

(28,304

)

$

(28,741

)

$

437

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Research and development expenses. Research and development expenses decreased by $6.5 million, or 31%, from
$20.9 million for the year
ended December 31, 2016 to $14.4 million for the year ended December 31, 2017. This overall decrease in research and development expenses was primarily due to the
following:



a decrease in clinical development expenses of $10.8 million for the year ended December 31, 2017 as compared to the year ended
December 31, 2016. During the fourth quarter of 2016, we completed subject visits for our SECURE clinical trial. This decrease reflects reduced clinical trial activity in the year ended
December 31, 2017 as compared to the year ended December 31, 2016 as we completed the close-out activities associated with our SECURE clinical trial, partially offset by;



an increase in manufacturing commercialization expenses of $3.6 million for the year ended December 31, 2017 as compared to the
year ended December 31, 2016. This increase reflects materials, labor and other costs associated with the scale-up process and the on-going qualification process of the commercial manufacturing
equipment. During 2018, we expect these expenses to increase significantly due to the receipt of the 2017 CRL from the FDA in December 2017. Any related costs to validate and manufacture Twirla, will
be recorded on as research and development expenses until we receive approval of our NDA for Twirla; and



an increase in regulatory expenses of $1.0 million for the year ended December 31, 2017 as compared to the year ended
December 31, 2016. This increase primarily represents external costs associated with the preparation of our NDA resubmission and response to the 2017 CRL.

General and administrative expenses. General and administrative expenses increased by $3.6 million, or 41%, from
$8.8 million for the
year ended December 31, 2016 to $12.4 million for the

year
ended December 31, 2017. This increase in general and administrative expense was primarily due to the following:



an increase in commercial development expense of $3.3 million for the year ended December 31, 2017 as compared to the year ended
December 31, 2016. This increase relates to the initiation of certain pre-commercialization activities such as brand building, advocacy and consulting. We have significantly scaled back our
preparation for the commercialization of Twirla in order to preserve cash.

Interest income. Interest income comprises interest income earned on cash and cash equivalents.

Interest expense. Interest expense is primarily attributable to our term loan with Hercules for the years ended December 31,
2017 and 2016.
Interest expense also includes the amortization of the discount associated with allocating value to the common stock warrants issued to Hercules, the amortization of the deferred financing costs
associated with the term loans and the accrual of the final payment due to Hercules. Interest expense decreased by $0.5 million, or 22% from $2.4 million for the year ended
December 31, 2016 to $1.9 million for the year ended December 31, 2017. This decrease is primarily the result of a decrease in the principal outstanding under our term loan with
Hercules for the year ended December 31, 2017 as compared to the year ended December 31, 2016.

Change in fair value of warrants. Certain of our warrants to purchase shares of our convertible preferred stock (prior to our
initial public
offering, or IPO) and common stock (post-IPO) are recorded at fair value and are subject to re-measurement at each balance sheet date. These liabilities are re-measured at each balance sheet date with
the corresponding charge to earnings recorded within change in fair value of warrant liability. The fair value of the convertible preferred stock warrants (prior to the IPO) and common stock warrants
with non-standard anti-dilution provisions are determined using the Black-Scholes option pricing model which incorporates a number of assumptions and judgments to estimate the fair value of these
warrants including the fair value per share of the underlying stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield, credit spread and expected
volatility of the price of the underlying stock. During the year ended December 31, 2017, we reported income of $0.1 million related to the decrease in the fair value of the warrants as
compared to income of $0.2 million for the year ended December 31, 2016. The market price of our common stock has been and may continue to be volatile. Consequently, future fluctuations
in the price of our common stock may cause significant increases or decreases in the fair value of the warrant liability.

Benefit from income taxes. Benefit from income taxes for the year ended December 31, 2016 represents the proceeds we
received from the sale of
New Jersey state net operating losses, or NOLs, as part of the Technology and Business Tax Certificate Program sponsored by the New Jersey Economic Development Authority. Under the program, emerging
biotechnology companies with unused state NOLs are allowed to sell these NOLs to other companies. In November 2016, we completed the sale of New Jersey state NOLs totaling approximately
$28.2 million and research and development credits totaling approximately $0.8 million for net proceeds of approximately $3.1 million.

Net Operating Losses and Tax Carryforwards

As of December 31, 2018, we had approximately $217.2 million of federal and $78.1 million of state net operating loss
carryforwards. We also potentially have federal and state research and development tax credits which would offset future taxable income. We have not completed a study to assess whether an ownership
change has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such studies. Accordingly, our ability to
utilize the aforementioned carryforwards may be limited. Additionally, for federal net operating losses generated prior to 2018, U.S. tax laws limit the time during which these carryforwards may be
utilized against future taxes. As a result, we may not be able to take full advantage of these carryforwards for federal and state tax purposes. As of December 31, 2018, all of our net
operating losses were fully offset by a valuation allowance.

On December 22, 2017, the United States Congress and the Administration have approved a bill reforming the US corporate income tax code which reduced our
corporate tax rate from 34% to 21% effective January 1, 2018. The carrying value of our deferred tax assets is also determined by the enacted US corporate income tax rate. Consequently, any
changes in the US corporate income tax rate will impact the carrying value of our deferred tax assets. Under the new corporate income tax rate of 21%, deferred income tax assets decreased by
$26.5 million with a corresponding decrease to the valuation allowance. There was no net effect of the tax reform enactment on financial statements.

Liquidity and Capital Resources

On May 29, 2014, we completed our initial public offering whereby we sold 9,166,667 shares of common stock, at a public offering price of
$6.00 per share, before underwriting discounts and expenses. The aggregate net proceeds received by us from the offering were $49.7 million.

In
January 2015, we completed a private placement of approximately 3.4 million shares of common stock at $5.85 per share. Proceeds from our private placement, net of commissions
and other offering costs, were $19.3 million.

In
February 2015, we entered into a loan and security agreement with Hercules Technology Growth Capital, Inc. or Hercules, for a term loan of up to $25.0 million. A first
tranche of $16.5 million was funded upon execution of the loan agreement, approximately $15.5 million of which was used to repay our existing term loan. The Hercules Loan Agreement was
amended in August 2016 to, among other things, extend the period during which we can draw the second tranche of $8.5 million to March 31, 2017 and extend the period during which we make
interest-only payments to January 31, 2017. The Hercules Loan Agreement was further amended in May 2017 to extend the period during which we could have drawn the additional tranche of
$8.5 million to January 31, 2018. The period during which the additional tranche of $8.5 million may be drawn has expired and therefore the $8.5 million can no longer be
drawn by us. On February 1, 2017, we began making principal payments with respect to the Hercules Loan. Our debt under the Hercules Loan Agreement was fully paid off on December 1, 2018.

In
January 2016, we closed an underwritten public offering of 5,511,812 shares of common stock at a public offering price of $6.35 per share. In February 2016, the underwriters of the
public offering of common stock exercised in full their option to purchase an additional 826,771 shares of common stock at the public offering price of $6.35 per share, less underwriting discounts and
commissions. A total of 6,338,583 shares of common stock were sold in the public offering, resulting in total net proceeds of approximately $37.5 million.

In
August 2017, we completed an underwritten public offering of 5,333,334 shares of common stock registered under the 2015 Shelf Registration Statement at a public offering price of
$3.75 per share. Proceeds from this public offering, net of underwriting discounts, commissions and other offering costs were approximately $18.5 million.

At
December 31, 2018, we had cash and cash equivalents totaling $7.8 million. We invest our cash equivalents in short-term highly liquid, interest-bearing investment-grade
and government securities in order to preserve principal.

The
following table sets forth the primary sources and uses of cash for the periods indicated:

Year Ended December 31,

2018

2017

2016

(In thousands)

Net cash used in operating activities

$

(16,895

)

$

(24,560

)

$

(23,301

)

Net cash used in investing activities

(318

)

(1,313

)

(31

)

Net cash (used in) provided by financing activities

(10,888

)

13,075

37,687

​

​

​

​

​

​

​

​

​

​

​

Net (decrease) increase in cash and cash equivalents

$

(28,101

)

$

(12,798

)

$

14,355

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Operating Activities

We have incurred significant costs in the area of research and development, including CRO fees, manufacturing, regulatory and other clinical
trial costs, as our primary product candidate Twirla was being developed. Net cash used in operating activities was $16.9 million for the year ended December 31, 2018 and consisted of a
net loss of $19.8 million which was offset, in part, by non-cash stock-based compensation expense of $3.6 million and non-cash interest expense of $0.3 million as well as a
decrease in accounts payable and accrued liabilities of $1.2 million which reflects higher manufacturing commercialization expenses and the accrued loan fee which were both paid in 2018. Net
cash used in operating activities was $24.6 million for the year ended December 31, 2017 and consisted of a net loss of $28.3 million which was offset, in part, by non-cash
compensation and non-cash interest expense of $4.3 million as well as a decrease in prepaid clinical trial costs of $1.8 million. Net cash used in operating activities was
$23.3 million for the year ended December 31, 2016 and consisted of a net loss of $28.7 million which was offset, in part, by non-cash compensation and non-cash interest expense
of $4.4 million as well as a decrease in prepaid clinical trial costs of $0.8 million. Cash used in operations in both 2018 and 2016 has been offset, in part, by the proceeds received
from the sale of New Jersey NOLs. The decreased clinical development expenses were offset by increased commercial development and commercial manufacturing expenses related to the initialization of
pre-commercialization activities for Twirla.

Investing Activities

Net cash used in investing activities for the years ended December 31, 2018, 2017 and 2016 was $0.3 million, $1.3 million
and $31,000, respectively. Cash used in investing activities for these years primarily represents the acquisition of equipment to be used in the commercialization of Twirla, if approved.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2018 was $10.9 million which represented principal payments
under the Hercules Loan Agreement which began on February 1, 2017 and were completed on December 1, 2018. Net cash provided by financing activities for the year ended December 31,
2017 was $13.1 million which included net proceeds of $18.5 million received from the sale of 5,333,334 shares of common stock, offset, in part, by principal payments of
$5.6 million under the Hercules Loan Agreement, which began on February 1, 2017. Net cash provided by financing activities for the year ended December 31, 2016 was
$37.7 million which included net proceeds of $37.5 million received from the sale of 6,338,583 shares of common stock and $0.3 million from the exercise of stock options.

Since 2012, we have sought regulatory approval for Twirla and, in the process, received two complete response letters from the FDA in connection
with our NDA for Twirla, which have included requests to conduct additional studies and gather additional information on our manufacturing process for Twirla. In January 2018, in response to the 2017
CRL, we significantly scaled back equipment qualification and validation of our commercial manufacturing process and our other commercial pre-launch activities. Since then, we have engaged with the
FDA to seek clarity on a
regulatory path for the potential approval of Twirla culminating in a formal dispute resolution request to the FDA, which was completed in October 2018.

We
plan to resubmit our Twirla NDA responding to the 2017 CRL in the second quarter of 2019. Consistent with our previous NDA resubmission in 2017, we currently expect that our
resubmission will be categorized as a Type 2 resubmission and receive a review period of six months from the date of resubmission of the NDA. The FDA has informed us that in connection with the
review of the Twirla NDA, the FDA plans to bring the issue of Twirla's safety and efficacy to an Advisory Committee. For more information about the regulatory history of Twirla, please see Part 1, Item 1,
"BusinessTwirla Clinical Development Program and Regulatory History.".

In
addition to the reductions in planned operating expenses we began implementing in January 2018, we reduced our workforce by approximately thirty percent in June 2018 as we pursued
formal dispute resolution and a path forward for the resubmission of our NDA for Twirla. We believe that our cash and cash equivalents as of December 31, 2018 along with the proceeds from our
private placement completed in March 2019 will be sufficient to meet our projected operating requirements into the fourth quarter of 2019. We will require additional capital to fund our operating
needs for the remainder of the fourth quarter of 2019 and beyond including, among other items, the resumption and completion of our commercial plan for Twirla, which primarily includes the validation
of our commercial manufacturing process and the commercial launch of Twirla, if approved, and advancing the development of our other potential product candidates. We cannot assure you that the FDA
will approve Twirla, or that we along with Corium, our third-party manufacturer, will be able to complete validation of our commercial manufacturing successfully and in a timely manner.

We
expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increase substantially if and as
we:



prepare for and participate in an Advisory Committee review of the safety and efficacy of Twirla;



seek marketing approval for Twirla in the United States;



establish a sales and marketing infrastructure to commercialize Twirla in the United States, if approved;



continue the equipment qualification and validation related to the expansion of Corium's manufacturing facility in preparation for potential
commercial operations;



continue to evaluate additional line extensions for Twirla and initiate development of potential product candidates in addition to Twirla;

add operational, financial and management information systems and personnel, including personnel to support our product development and future
commercialization efforts.

We
may also need to raise additional funds sooner if we choose to accelerate components of our commercial plan or we encounter any unforeseen events that affect our current business plan
or we may choose to raise additional funds to provide us with additional working capital. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to
raise additional

capital
when needed or on attractive terms or are unable to enter into strategic collaborations, we then may be unable to complete the development of Twirla and may also be required to further cut
operating costs, forgo future development and other opportunities or even terminate our operations, which may involve seeking bankruptcy protection. Because of the numerous risks and uncertainties
associated with the development, including, among other things, manufacturing scale up, FDA review of the NDA for Twirla and commercialization of Twirla, if approved, we are unable to estimate the
amounts of increased capital outlays and operating expenses associated with completing the development of Twirla. Our future capital requirements will depend on many factors,
including:



the costs, timing and outcome of regulatory review of Twirla;



the costs of the equipment qualification and validation related to the expansion of Corium's manufacturing facility in preparation for
potential commercial operations;



the costs of future commercialization activities, including the commercial launch, product sales, marketing, manufacturing and distribution,
for Twirla, if approved;



the revenue, if any, received from commercial sales of Twirla, if approved;

the costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other arrangements
that we may establish.

We
do not have any committed external source of funds. Until such time, if ever, as we can generate substantial cash flows from product revenues, we expect to finance our cash needs
through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

Going Concern

Pursuant to the receipt of the 2017 CRL, and the delay in the approval timeline for Twirla, our ability to continue operations for the remainder
of the fourth quarter of 2019 and beyond will depend on our ability to obtain additional funding, as to which no assurances can be given. Based upon the foregoing, management has concluded that there
is substantial doubt about our ability to continue as a going concern. There can be no assurance that any financing by us can be realized, or if realized, what the terms of any such financing may be,
or that any amount that we are able to raise will be adequate.

As
of December 31, 2018, we had cash and cash equivalents of $7.8 million. In March 2019, we completed a private placement of approximately 8.4 million shares of our
common stock resulting in gross proceeds of approximately $7.8 million. Our future success depends on our ability to raise additional capital and/or implement various strategic alternatives. We
continue to analyze strategic and financing alternatives, potential asset sales as well as mergers and acquisitions. We cannot be certain that these initiatives or raising additional capital, whether
through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us. If we issue additional
securities to raise funds, whether through the issuance of equity or convertible debt securities, or any combination thereof, these securities may have rights, preferences, or privileges senior to
those of our common stock, and our current shareholders may experience dilution. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing
arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, including Twirla, or grant
licenses on terms that may not be favorable to us. If we are unable to obtain funds

when
needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forego future development and other opportunities and may need to seek
bankruptcy protection.

The
financial statements as of December 31, 2018 have been prepared under the assumption that we will continue as a going concern for the next 12 months following the date
this Annual Report on Form 10-K is filed. Our ability to continue as a going concern is dependent upon our uncertain ability to obtain additional equity and/or debt financing and reduce
expenditures. The audited financial
statements as of December 31, 2018 do not include any adjustments that might result from the outcome of this uncertainty.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2018 that will affect our future liquidity:

Total

Less than
1 year

1 - 3 years

3 - 5 years

More than
5 years

(In thousands)

Operating lease

391

200

191





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Total

$

391

$

200

$

191

$



$



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Our
operating lease commitment relates to our lease of office space in Princeton, New Jersey. In August 2015, we renewed this lease with the new term to expire in November 2020.

Shelf Registration Statements

On June 30, 2018, the shelf registration statement we filed on June 19, 2015, which we refer to as the 2015 Shelf Registration
Statement, expired. On November 2, 2018, we filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and
units up to an aggregate amount of $100.0 million, which we refer to as the 2018 Shelf Registration Statement. On November 14, 2018, the 2018 Shelf Registration Statement was declared
effective by the SEC.

On
January 23, 2019, we filed a prospectus supplement to our 2018 Shelf Registration Statement registering an at-the-market offering program we entered into for the sale of up to
$10.0 million of shares of our common stock.

2016 Public Offering of Common Stock

In January 2016, we closed an underwritten public offering of 5,511,812 shares of common stock registered under the 2015 Shelf Registration
Statement at a public offering price of $6.35 per share. In February 2016, the underwriters of the public offering of common stock exercised in full, their option to purchase an additional 826,771
shares of common stock at the public offering price of $6.35 per share, less underwriting discounts and commissions. A total of 6,338,583 shares of common stock were sold in the public offering
resulting in total net proceeds of approximately $37.5 million. One of our stockholders, who is also affiliated with an individual that was at the time a member of our Board of Directors,
purchased 393,700 shares of common stock for approximately $2.5 million in the public offering.

2017 Public Offering of Common Stock

In August 2017, we completed an underwritten public offering of 5,333,334 shares of common stock registered under the 2015 Shelf Registration
Statement at a public offering price of $3.75 per

share.
Proceeds from this public offering, net of underwriting discounts, commissions and other offering costs were approximately $18.5 million.

Recent Accounting Pronouncements

See Note 2 to our financial statements that discusses new accounting pronouncements.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such
as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating
financing transactions that are not required to be reflected on our balance sheets.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risks in the ordinary course of our business. Market risk is the risk of change in fair value of a financial instrument
due to changes in interest rates, equity prices, financing, exchange rates or other factors. These market risks are principally limited to interest rate fluctuations.

We
had cash and cash equivalents of $7.8 million and $35.9 million at December 31, 2018 and December 31, 2017, respectively consisting primarily of funds in
cash and money market accounts. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter
into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase in interest rates would have a material
effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

Our
results of operations and cash flows were subject to fluctuations due to changes in interest rates, principally in connection with our loan agreement with Hercules (through
November 30, 2018). We do not believe we are materially exposed to changes in interest rates. We do not currently use interest rate derivative instruments to manage exposure to interest rate
changes. We estimate that a 1% unfavorable change in interest rates would have resulted in approximately a $72,000 increase in interest expense for the year ended December 31, 2018.

Inflation Risk

Inflation generally affects us by increasing our cost of labor and pricing of contracts and agreements. We do not believe that inflation had a
material effect on our business, financial condition, or results of operations during the year ended December 31, 2018.

To the stockholders and the board of directors of Agile Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Agile Therapeutics, Inc. (the "Company") as of December 31, 2018 and 2017, the
related statements of operations, statements of changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with US generally
accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in
Note 1 to the financial statements, the Company has suffered recurring losses from operations, has experienced delays in the approval of its product candidate and has stated that substantial
doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in
Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent
with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion of the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.

/s/
Ernst & Young LLP

We
have served as the Company's auditor since 2010.
Iselin, New Jersey
March 12, 2019